Brookfield Property REIT Inc.
CONSOLIDATED STATEMENTS OF EQUITY
(UNAUDITED)
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|
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|
|
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Combined Class B Stock
|
|
Class C Stock
|
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Preferred
Stock
|
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Additional
Paid-In
Capital
|
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Accumulated Deficit
|
|
Accumulated
Other
Comprehensive Loss
|
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|
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Noncontrolling
Interests in Consolidated Real Estate Affiliates and Operating Partnership
|
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Total
Equity
|
|
Redeemable Class A Stock
|
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(Dollars in thousands, except for per share and share amounts)
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|
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|
|
|
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|
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Balance at January 1, 2019
|
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$
|
4,547
|
|
|
$
|
6,401
|
|
|
$
|
242,042
|
|
|
$
|
5,772,824
|
|
|
$
|
(4,721,335)
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|
$
|
(82,653)
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|
|
|
$
|
1,553,596
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|
|
$
|
2,775,422
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$
|
2,305,895
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|
|
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|
|
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|
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|
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Net income (loss)
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|
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|
|
|
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(259,617)
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|
(34,288)
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|
(293,905)
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|
64,047
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|
|
Distributions to noncontrolling interests in consolidated Real Estate Affiliates
|
|
|
|
|
|
|
|
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|
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|
|
(61,703)
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|
|
(61,703)
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|
|
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Acquisition/disposition of partner's noncontrolling interests in consolidated Real Estate Affiliates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,204)
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|
|
(3,204)
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|
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|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
Buyback of Class A Stock
|
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|
|
|
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|
|
3,275
|
|
|
|
|
|
|
|
|
3,275
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|
|
(114,542)
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|
|
Buyback of Class B-1 Stock
|
|
|
(105)
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|
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|
|
(158,517)
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|
|
(65,902)
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|
|
|
(224,524)
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|
|
Series K Preferred Unit redemption
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|
|
|
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|
|
|
|
923
|
|
|
|
|
|
|
(544)
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|
|
379
|
|
|
|
|
Long Term Incentive Plan & Stock Option Expense
|
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|
|
|
|
|
|
|
|
|
430
|
|
|
|
|
|
|
|
|
430
|
|
|
|
|
Restricted stock grants, net (14,214 Class A Stock)
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|
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|
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|
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—
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|
|
5,298
|
|
|
Preferred stock dividend ($0.7968 per share)
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|
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|
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|
|
(7,968)
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(7,968)
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|
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|
|
|
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|
|
|
|
|
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|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
679
|
|
|
|
|
|
|
679
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|
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|
|
|
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|
|
Class A Conversion to Class B-1 (24,873,824 Class A Shares converted to 22,128,255 Class B-1 Shares)
|
|
|
222
|
|
|
|
|
|
|
473,102
|
|
|
49,029
|
|
|
|
|
|
|
|
|
522,353
|
|
|
(522,350)
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|
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|
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|
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|
|
|
|
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|
|
|
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|
|
|
|
|
|
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|
|
Dividends on Class A Stock ($0.66 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(64,047)
|
|
|
Dividends on Combined Class B Stock (Refer to Note 9)
|
|
|
|
|
|
|
|
|
|
|
(651,098)
|
|
|
|
|
|
|
|
|
(651,098)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2019
|
|
|
$
|
4,664
|
|
|
$
|
6,401
|
|
|
$
|
242,042
|
|
|
$
|
6,087,409
|
|
|
$
|
(5,652,263)
|
|
|
$
|
(81,974)
|
|
|
|
|
$
|
1,453,857
|
|
|
$
|
2,060,136
|
|
|
$
|
1,674,301
|
|
|
|
|
|
|
|
|
|
|
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|
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|
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|
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|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brookfield Property REIT Inc.
CONSOLIDATED STATEMENTS OF EQUITY (Continued)
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined Class B Stock
|
|
Class C Stock
|
|
Preferred
Stock
|
|
Additional
Paid-In
Capital
|
|
Accumulated
Deficit
|
|
Accumulated
Other
Comprehensive Loss
|
|
|
|
Noncontrolling
Interests in Consolidated Real Estate Affiliates and Operating Partnership
|
|
Total
Equity
|
|
Redeemable Class A Stock
|
|
|
|
|
(Dollars in thousands, except for per share and share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at April 1, 2019
|
|
|
$
|
4,497
|
|
|
$
|
6,401
|
|
|
$
|
242,042
|
|
|
$
|
5,731,469
|
|
|
$
|
(5,233,154)
|
|
|
$
|
(83,113)
|
|
|
|
|
$
|
1,510,010
|
|
|
$
|
2,178,152
|
|
|
$
|
2,069,999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
|
|
|
|
|
|
|
|
(257,231)
|
|
|
|
|
|
|
(39,307)
|
|
|
(296,538)
|
|
|
30,011
|
|
|
Distributions to noncontrolling interests in consolidated Real Estate Affiliates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,708)
|
|
|
(14,708)
|
|
|
|
|
Acquisition/disposition of partner's noncontrolling interests in consolidated Real Estate Affiliates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,138)
|
|
|
(2,138)
|
|
|
|
|
Long-Term Incentive Plan & Stock Option Expense
|
|
|
|
|
|
|
|
|
|
|
430
|
|
|
|
|
|
|
|
|
430
|
|
|
|
|
Buyback of Class A Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
(16,266)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock dividend ($0.3984 per share)
|
|
|
|
|
|
|
|
|
|
|
(3,984)
|
|
|
|
|
|
|
|
|
(3,984)
|
|
|
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
1,139
|
|
|
|
|
|
|
1,139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock expense, net of forfeitures (10,948 Class A Stock)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
2,176
|
|
|
Class A Conversion to Class B-1 (18,171,862 Class A Shares converted to 16,648,280 Class B-1 Shares)
|
|
|
167
|
|
|
|
|
|
|
355,940
|
|
|
25,504
|
|
|
|
|
|
|
|
|
381,611
|
|
|
(381,608)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends on Class A Stock ($0.33 per share)
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
|
(30,011)
|
|
|
Dividends on Combined Class B Stock (Refer to Note 9)
|
|
|
|
|
|
|
|
|
|
|
$
|
(183,828)
|
|
|
|
|
|
|
|
|
(183,828)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2019
|
|
|
$
|
4,664
|
|
|
$
|
6,401
|
|
|
$
|
242,042
|
|
|
$
|
6,087,409
|
|
|
$
|
(5,652,263)
|
|
|
$
|
(81,974)
|
|
|
|
|
$
|
1,453,857
|
|
|
$
|
2,060,136
|
|
|
$
|
1,674,301
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brookfield Property REIT Inc.
CONSOLIDATED STATEMENTS OF EQUITY (Continued)
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined Class B Stock
|
|
Class C Stock
|
|
Preferred
Stock
|
|
Additional
Paid-In
Capital
|
|
Accumulated Deficit
|
|
Accumulated
Other
Comprehensive Loss
|
|
|
|
Noncontrolling
Interests in Consolidated Real Estate Affiliates and Operating Partnership
|
|
Total
Equity
|
|
Redeemable Class A Stock
|
|
|
|
|
(Dollars in thousands, except for per share and share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2020
|
|
|
$
|
4,937
|
|
|
$
|
6,401
|
|
|
$
|
242,042
|
|
|
$
|
6,670,844
|
|
|
$
|
(5,076,455)
|
|
|
$
|
(85,402)
|
|
|
|
|
$
|
1,532,740
|
|
|
$
|
3,295,107
|
|
|
$
|
1,354,234
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
|
|
|
|
|
|
|
|
(330,432)
|
|
|
|
|
|
|
(42,993)
|
|
|
(373,425)
|
|
|
39,555
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition/disposition of partner's noncontrolling interests in consolidated Real Estate Affiliates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(132)
|
|
|
(132)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Buyback of Class A Stock
|
|
|
|
|
|
|
|
|
|
|
2,082
|
|
|
|
|
|
|
|
|
2,082
|
|
|
(17,955)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series K Preferred Unit redemption
|
|
|
|
|
|
|
|
|
|
|
1,879
|
|
|
|
|
|
|
(29,427)
|
|
|
(27,548)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long Term Incentive Plan & Stock Option Expense
|
|
|
|
|
|
|
|
|
|
|
31
|
|
|
|
|
|
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock dividend ($0.7968 per share)
|
|
|
|
|
|
|
|
|
|
|
(7,969)
|
|
|
|
|
|
|
|
|
(7,969)
|
|
|
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
(16,313)
|
|
|
|
|
(1,626)
|
|
|
(17,939)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock grants, net of forfeitures (806,275 Class A Stock)
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
3,577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A Conversion to Class B-1 (7,957,603 Class A Shares converted to 5,488,251 Class B-1 Shares)
|
|
|
55
|
|
|
|
|
|
|
117,338
|
|
|
49,718
|
|
|
|
|
|
|
|
|
167,111
|
|
|
(167,111)
|
|
|
Dividends on Class A Stock ($0.6650 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
(39,555)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2020
|
|
|
$
|
4,992
|
|
|
$
|
6,401
|
|
|
$
|
242,042
|
|
|
$
|
6,788,182
|
|
|
$
|
(5,361,146)
|
|
|
$
|
(101,715)
|
|
|
|
|
$
|
1,458,562
|
|
|
$
|
3,037,318
|
|
|
$
|
1,172,745
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brookfield Property REIT Inc.
CONSOLIDATED STATEMENTS OF EQUITY (Continued)
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined Class B Stock
|
|
Class C Stock
|
|
Preferred
Stock
|
|
Additional
Paid-In
Capital
|
|
Accumulated
Deficit
|
|
Accumulated
Other
Comprehensive Loss
|
|
|
|
Noncontrolling
Interests in Consolidated Real Estate Affiliates and Operating Partnership
|
|
Total
Equity
|
|
Redeemable Class A Stock
|
|
|
|
|
(Dollars in thousands, except for per share and share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at April 1, 2020
|
|
|
$
|
4,988
|
|
|
$
|
6,401
|
|
|
$
|
242,042
|
|
|
$
|
6,781,031
|
|
|
$
|
(5,135,194)
|
|
|
$
|
(99,784)
|
|
|
|
|
$
|
1,484,038
|
|
|
$
|
3,283,522
|
|
|
$
|
1,183,669
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
|
|
|
|
|
|
|
|
(228,098)
|
|
|
|
|
|
|
(23,461)
|
|
|
(251,559)
|
|
|
19,048
|
|
|
Distributions to noncontrolling interests in consolidated Real Estate Affiliates and Operating Partnership
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
Acquisition/disposition of partner's noncontrolling interests in consolidated Real Estate Affiliates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
63
|
|
|
63
|
|
|
|
|
Buyback of Class A Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
Series K Preferred Unit redemption
|
|
|
|
|
|
|
|
|
|
|
11
|
|
|
|
|
|
|
(452)
|
|
|
(441)
|
|
|
|
|
Long Term Incentive Plan & Stock Option Expense
|
|
|
|
|
|
|
|
|
|
|
31
|
|
|
|
|
|
|
|
|
31
|
|
|
|
|
Preferred stock dividend ($0.3984 per share)
|
|
|
|
|
|
|
|
|
|
|
(3,985)
|
|
|
|
|
|
|
|
|
(3,985)
|
|
|
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,931)
|
|
|
|
|
(1,626)
|
|
|
(3,557)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock grants, net of forfeitures (8,427 Class A Stock forfeitures)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
2,320
|
|
|
Class A Conversion to Class B-1 (630,686 Class A Shares converted to 334,503 Class B-1 Shares)
|
|
|
4
|
|
|
|
|
|
|
7,151
|
|
|
6,089
|
|
|
|
|
|
|
|
|
13,244
|
|
|
(13,244)
|
|
|
Dividends on Class A Stock ($0.33 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
(19,048)
|
|
|
Dividends on Combined Class B Stock (Refer to Note 9)
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2020
|
|
|
$
|
4,992
|
|
|
$
|
6,401
|
|
|
$
|
242,042
|
|
|
$
|
6,788,182
|
|
|
$
|
(5,361,146)
|
|
|
$
|
(101,715)
|
|
|
|
|
$
|
1,458,562
|
|
|
$
|
3,037,318
|
|
|
$
|
1,172,745
|
|
The accompanying notes are an integral part of these consolidated financial statements.
Brookfield Property REIT Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
2020
|
|
2019
|
|
|
(Dollars in thousands)
|
|
|
|
Cash Flows (used in) provided by Operating Activities:
|
|
|
|
|
Net (loss) income
|
$
|
(332,054)
|
|
|
$
|
(226,822)
|
|
|
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
|
|
|
|
|
Equity in loss of Unconsolidated Real Estate Affiliates
|
61,269
|
|
|
15,711
|
|
|
Distributions received from Unconsolidated Real Estate Affiliates
|
24,993
|
|
|
39,610
|
|
|
Provision for doubtful accounts
|
19,728
|
|
|
3,746
|
|
|
Depreciation and amortization
|
320,242
|
|
|
237,181
|
|
|
Amortization/write-off of deferred finance costs
|
16,391
|
|
|
15,398
|
|
|
Accretion/write-off of debt market rate adjustments
|
(719)
|
|
|
(831)
|
|
|
Amortization of intangibles other than in-place leases
|
2,353
|
|
|
(4,107)
|
|
|
Amortization of right-of-use assets
|
5,250
|
|
|
2,403
|
|
|
Straight-line rent amortization
|
(4,186)
|
|
|
(3,949)
|
|
|
Deferred income taxes
|
2,638
|
|
|
6,354
|
|
|
|
|
|
|
|
|
|
|
|
|
Unconsolidated Real Estate Affiliates - loss on investment, net
|
(11,527)
|
|
|
(104,354)
|
|
|
Loss from changes in control of investment properties and other, net
|
15,433
|
|
|
—
|
|
|
Provision for impairment
|
71,455
|
|
|
184,347
|
|
|
Gain on extinguishment of debt
|
(14,320)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Net changes:
|
|
|
|
|
Accounts and notes receivable, net
|
(282,131)
|
|
|
(6,159)
|
|
|
Prepaid expenses and other assets (see Notes 7 and 14)
|
(20,464)
|
|
|
4,603
|
|
|
Deferred expenses, net
|
(776)
|
|
|
(8,352)
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses (see Notes 7 and 15)
|
(23,997)
|
|
|
(59,240)
|
|
|
Other, net
|
(4,202)
|
|
|
5,728
|
|
|
Net cash (used in) provided by operating activities
|
(154,624)
|
|
|
101,267
|
|
|
Cash Flows (used in) provided by Investing Activities:
|
|
|
|
|
Acquisition of real estate and property additions
|
—
|
|
|
(16,596)
|
|
|
Development of real estate and property improvements
|
(159,482)
|
|
|
(291,244)
|
|
|
Loans to affiliates
|
—
|
|
|
(95,947)
|
|
|
Loans to joint venture and joint venture partners
|
—
|
|
|
(330,000)
|
|
|
Proceeds from repayment of loans to affiliates
|
—
|
|
|
330,000
|
|
|
Proceeds from repayment of loans to joint venture and joint venture partners
|
—
|
|
|
18,020
|
|
|
Proceeds from sales of investment properties and Unconsolidated Real Estate Affiliates
|
81,024
|
|
|
12,000
|
|
|
Contributions to Unconsolidated Real Estate Affiliates
|
(54,917)
|
|
|
(144,213)
|
|
|
Distributions received from Unconsolidated Real Estate Affiliates in excess of income
|
30,933
|
|
|
256,075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities
|
(102,442)
|
|
|
(261,905)
|
|
|
Cash Flows provided by (used in) Financing Activities:
|
|
|
|
|
Proceeds from refinancing/issuance of mortgages, notes and loans payable (including related party debt - see Note 6)
|
661,000
|
|
|
2,492,339
|
|
|
Principal payments on mortgages, notes and loans payable - (including related party debt - see Note 6)
|
(328,895)
|
|
|
(1,238,657)
|
|
|
Payment of deferred finance costs
|
34
|
|
|
(14,549)
|
|
|
|
|
|
|
|
Buyback of Class A Stock
|
(15,873)
|
|
|
(111,266)
|
|
|
Buyback of Combined Class B Stock
|
—
|
|
|
(224,524)
|
|
|
Series K preferred unit redemptions
|
(27,946)
|
|
|
(14,556)
|
|
|
|
|
|
|
|
Cash contributions from noncontrolling interests in consolidated real estate affiliates
|
31,688
|
|
|
—
|
|
|
Cash distributions to noncontrolling interests in consolidated real estate affiliates
|
—
|
|
|
(52,058)
|
|
|
Cash distributions paid to stockholders
|
(39,555)
|
|
|
(715,144)
|
|
|
|
|
|
|
|
Cash distributions paid to preferred stockholders
|
(7,969)
|
|
|
(7,969)
|
|
|
Cash distributions and redemptions paid to unit holders
|
(2,209)
|
|
|
(3,781)
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
270,275
|
|
|
109,835
|
|
|
|
|
|
|
|
Net change in cash, cash equivalents and restricted cash
|
13,209
|
|
|
(50,803)
|
|
|
Cash, cash equivalents and restricted cash at beginning of period
|
275,512
|
|
|
298,693
|
|
|
Cash, cash equivalents and restricted cash at end of period
|
$
|
288,721
|
|
|
$
|
247,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brookfield Property REIT Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(UNAUDITED)
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
2020
|
|
2019
|
|
|
(Dollars in thousands)
|
|
|
|
Supplemental Disclosure of Cash Flow Information:
|
|
|
|
|
Interest paid
|
$
|
326,120
|
|
|
$
|
315,548
|
|
|
Interest capitalized
|
3,462
|
|
|
12,067
|
|
|
Income taxes paid
|
1,059
|
|
|
5,256
|
|
|
Accrued capital expenditures included in accounts payable and accrued expenses
|
262,136
|
|
|
260,636
|
|
|
Cash paid for amounts included in the measurement of lease liabilities
|
4,639
|
|
|
4,379
|
|
|
Recognition of right-of-use asset
|
—
|
|
|
75,504
|
|
|
Lease liabilities arising from obtaining right-of-use lease asset
|
—
|
|
|
75,504
|
|
|
Straight-line ground rent asset reclassed to right-of-use asset
|
—
|
|
|
53,779
|
|
|
Straight-line ground rent liability reclassed to right-of-use asset
|
—
|
|
|
3,817
|
|
|
Straight-line building rent liability reclassed to right-of-use asset
|
—
|
|
|
3,599
|
|
|
Non-cash transfer of legal rights for Coronado Center Mall (Refer to Note 3)
|
—
|
|
|
53,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
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|
|
The accompanying notes are an integral part of these consolidated financial statements.
Brookfield Property REIT Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)
NOTE 1 ORGANIZATION
Readers of this Quarterly Report on Form 10-Q (this "Quarterly Report") should refer to the Company's (as defined below) audited consolidated financial statements for the year ended December 31, 2019 which are included in the Company's Annual Report on Form 10-K (our "Annual Report") for the fiscal year ended December 31, 2019 (Commission File No. 001-34948), as certain footnote disclosures which would substantially duplicate those contained in our Annual Report have been omitted from this Quarterly Report. In the opinion of management, all adjustments necessary for a fair presentation (which include only normal recurring adjustments) have been included in this Quarterly Report. Unless context otherwise requires, capitalized terms used, but not defined in this Quarterly Report, have the same meanings as in our Annual Report.
General
Brookfield Property REIT Inc. (referred to herein as "BPYU" or the "Company"), formerly known as GGP Inc. ("GGP"), a Delaware corporation, was organized in July 2010 and is an externally managed real estate investment trust ("REIT").
On March 26, 2018, GGP and Brookfield Property Partners L.P. ("BPY") entered into an agreement and plan of merger (as amended by the amendment thereto dated June 25, 2018, the "Merger Agreement") pursuant to which BPY would acquire all of the shares of GGP common stock, par value $0.01 per share, that BPY and its affiliates did not already own through a series of transactions (collectively, the "BPY Transaction"), including, among other things, the exchange of all shares of GGP common stock owned by certain affiliates of BPY and any subsidiary of GGP for a newly authorized series of preferred stock of GGP designated Series B Preferred Stock (the "Class B Exchange") and the payment of a special dividend payable to certain holders of record of GGP common stock pursuant to the terms of the Merger Agreement (the "Pre-Closing Dividend").
BPYU is an indirect subsidiary of BPY, one of the world's largest commercial real estate companies. In these notes, the terms "we," "us" and "our" refer to BPYU and its subsidiaries. BPYU, through its subsidiaries and affiliates, is an owner and operator of retail properties. As of June 30, 2020, we were the owner, either entirely or with joint venture partners, of 122 retail properties in the United States.
Substantially all of our business is conducted through BPR OP, LP ("BPROP"), which we sometimes refer to herein as the Operating Partnership, and its subsidiaries. As of June 30, 2020, BPYU held approximately 99% of the common equity of BPROP, while the remaining 1% was held by limited partners and certain previous contributors of properties to BPROP.
In addition to holding ownership interests in various joint ventures, the Operating Partnership generally conducts its operations through BPR REIT Services LLC ("BPRRS"), Brookfield Properties Retail Inc. ("BPRI") and General Growth Management, Inc. ("GGMI"). Each of GGMI and BPRI is a taxable REIT subsidiary ("TRS"), which earn real estate management, leasing, development, and financing fees for other ancillary services for a majority of our Unconsolidated Real Estate Affiliates (defined below) and for substantially all of our Consolidated Properties (defined below). BPRI also serves as a contractor to GGMI for these services. BPRRS generally provides financial, accounting, tax, legal, development, and other services to our Consolidated Properties.
We refer to our ownership interests in properties in which we own a majority or controlling interest and are consolidated under accounting principles generally accepted in the United States of America ("GAAP") as the "Consolidated Properties." We also own interests in certain properties through joint venture entities in which we own a noncontrolling interest ("Unconsolidated Real Estate Affiliates") and we refer to those properties as the "Unconsolidated Properties".
Brookfield Property REIT Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Basis of Presentation
The accompanying consolidated financial statements include the accounts of BPYU, our subsidiaries and joint ventures in which we have a controlling interest. For consolidated joint ventures, the noncontrolling partner's share of the assets, liabilities and operations of the joint ventures (generally computed as the joint venture partner's ownership percentage) is included in noncontrolling interests in consolidated real estate affiliates as permanent equity of the Company. Intercompany balances and transactions have been eliminated. Noncontrolling interests are included on our Consolidated Balance Sheets related to the Common, Preferred, and LTIP Units of BPROP and are presented either as redeemable noncontrolling interests or as noncontrolling interests in our permanent equity. The Operating Partnership and each of our consolidated joint ventures are variable interest entities as the limited partners do not have substantive kick-out rights or substantive participating rights. However, as the Company holds a majority voting interest in the Operating Partnership and our consolidated joint ventures, it qualifies for the exemption from providing certain of the disclosure requirements associated with variable interest entities.
We operate in a single reportable segment, which includes the operation, development and management of retail and other rental properties. Our portfolio is targeted to a range of market sizes and consumer tastes. Each of our operating properties is considered a separate operating segment, as each property earns revenues and incurs expenses, individual operating results are reviewed and discrete financial information is available. The Company's chief operating decision maker is comprised of a team of several members of executive management who use property operations in assessing segment operating performance. We do not distinguish or group our consolidated operations based on geography, size or type for purposes of making property operating decisions. Our operating properties have similar economic characteristics and provide similar products and services to our tenants. There are no individual operating segments that are greater than 10% of combined revenue or combined assets. When assessing segment operating performance, certain non-cash and non-comparable items such as straight-line rent, depreciation expense and intangible asset and liability amortization are excluded from property operations, which are a result of GGP's emergence from bankruptcy, acquisition accounting and other capital contribution or restructuring events. Further, all material operations are within the United States and no customer or tenant comprises more than 10% of consolidated revenues. As a result, the Company's operating properties are aggregated into a single reportable segment.
Acquisitions of Operating Properties (Note 3)
The fair values of tangible assets are determined on an "if vacant" basis. The "if vacant" fair value is allocated to land, where applicable, buildings, equipment and tenant improvements based on comparable sales and other relevant information with respect to the property. Specifically, the "if vacant" value of the buildings and equipment was calculated using a cost approach utilizing published guidelines for current replacement cost or actual construction costs for similar, recently developed properties; and an income approach. Assumptions used in the income approach to the value of buildings include: capitalization and discount rates, lease-up time, market rents, make ready costs, land value, and site improvement value.
The estimated fair value of in-place tenant leases includes lease origination costs (costs we would have incurred to lease the property to the current occupancy level of the property) and the lost revenues during the period necessary to lease-up from vacant to current occupancy level. Such estimates include the fair value of leasing commissions, legal costs and tenant coordination costs that would be incurred to lease the property to this occupancy level. Additionally, we evaluate the time period over which such occupancy level would be achieved and include an estimate of the net operating costs (primarily real estate taxes, insurance, and utilities) incurred during the lease-up period, which generally ranges up to one year. The fair value of the acquired in-place tenant leases is included in the balance of buildings and equipment and amortized over the remaining lease term for each tenant.
Identifiable intangible assets and liabilities are calculated for above-market and below-market tenant and ground leases where we are the lessor or the lessee. The difference between the contractual rental rates and our estimate of market rental rates is measured over a period equal to the remaining non-cancelable term of the leases, including significantly below-market renewal options for which exercise of the renewal option appears to be reasonably certain. The remaining term of leases with renewal options at terms significantly below market reflect the assumed exercise of such below-market renewal options and assume the amortization period would coincide with the extended lease term.
Brookfield Property REIT Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)
The gross asset balances and accumulated amortization of the in-place value of tenant leases are included in buildings and equipment in our Consolidated Balance Sheets.
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Gross Asset
|
|
Accumulated
Amortization
|
|
Net Carrying
Amount
|
|
|
|
|
|
|
|
|
As of June 30, 2020
|
|
|
|
|
|
|
Tenant leases:
|
|
|
|
|
|
|
In-place value
|
$
|
320,909
|
|
|
$
|
(83,423)
|
|
|
$
|
237,486
|
|
|
|
|
|
|
|
|
|
As of December 31, 2019
|
|
|
|
|
|
|
Tenant leases:
|
|
|
|
|
|
|
In-place value
|
$
|
311,838
|
|
|
$
|
(72,658)
|
|
|
$
|
239,180
|
|
The above-market tenant leases are included in prepaid expenses and other assets (Note 14); the below-market tenant leases are included in accounts payable and accrued expenses (Note 15) in our Consolidated Balance Sheets.
Amortization/accretion of all intangibles, including the intangibles in Note 14 and Note 15, had the following effects on our income from continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
Amortization/accretion effect on continuing operations
|
$
|
(16,097)
|
|
|
$
|
(4,599)
|
|
|
$
|
(45,155)
|
|
|
$
|
(9,781)
|
|
|
Future amortization/accretion of all intangibles, including the intangibles in Note 14 and Note 15, is estimated to decrease results from continuing operations as follows:
|
|
|
|
|
|
|
|
|
|
|
Year
|
|
Amount
|
|
2020 Remaining
|
|
$
|
24,971
|
|
|
2021
|
|
39,860
|
|
|
2022
|
|
32,124
|
|
|
2023
|
|
25,479
|
|
|
2024
|
|
19,935
|
|
Revenue Recognition and Related Matters
Accounting for real estate sales distinguishes between sales to a customer or non-customer for purposes of revenue recognition. Once we, as the seller, determine that we have a contract, we will identify each distinct non-financial asset promised to the counter-party and whether the counter-party obtains control and transfers risks and rewards of ownership of each non-financial asset to determine if we should derecognize the asset.
Leases
We have entered into lease arrangements for the land and buildings at certain properties, as well as for the use of office space in Chicago, Illinois. We account for leases under Accounting Standards Update ("ASU") 2016-02, Leases ("ASC 842", "Topic 842", or "the new leasing standard").
The new leasing standard requires lessees to record a right-of-use ("ROU") asset and a related lease liability for the rights and obligations associated with all lessee leases. Accounting Standards Codification ("ASC") 842 also modified the lease classification criteria through the elimination of "bright-line" tests, the removal of historical real estate specific lease provisions, and changes to lessor accounting to align with the new revenue recognition standard ASC 606, Revenue from Contracts with Customers.
Brookfield Property REIT Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)
We elected to use the following additional practical expedients permitted by the new leasing standard:
•The short-term lease election that allows a lessee not to apply the balance sheet recognition requirements to leases with a term of 12 months or less; lease payments associated with these leases are recognized on a straight-line basis as an expense over the lease term and are not material.
•The practical expedient which allows a lessee to not separate lease and non-lease components. We have elected to apply this election to all classes of underlying assets.
Lessee arrangements
To account for leases for which we are the lessee under the new leasing standard, contracts must be analyzed upon inception to determine if the arrangement is, or contains, a lease. A lease conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Lease classification tests and measurement procedures are performed at the lease commencement date. Differences in lease classification will affect only the pattern and classification of expense recognition in our Consolidated Statements of Operations and Comprehensive Income (Loss).
The lease liability is initially measured as the present value of the lease payments over the lease term, discounted using the interest rate implicit in the lease, if that rate is readily determinable; otherwise, the lessee’s incremental borrowing rate is used. The lease liability balance is subsequently amortized using the effective interest method. The incremental borrowing rate is determined using an approach based on the rate of interest that the lessee would pay to borrow on a collateralized basis over a similar term at an amount equal to the lease payments in a similar economic environment. We utilized a market-based approach to estimate the Incremental Borrowing Rate ("IBR") for each individual lease. The approach required significant judgment. Therefore, we utilized different data sets to estimate base IBRs via an analysis of (i) yields on outstanding public debt of BPYU, as well as comparable companies, (ii) observable mortgage rates, and (iii) unlevered property yields and discount rates. We then applied adjustments to account for considerations related to (i) term and (ii) security that may not be fully incorporated by the aforementioned data sets. Based on individual characteristics of each lease, we selected an IBR taking into consideration how each data approach and adjustments thereto incorporate term, currency and security.
The lease term is the noncancelable period of the lease, and includes any renewal and termination options we are reasonably certain to exercise. The reasonably certain threshold is evaluated at lease commencement and is typically met if substantial economic incentives or termination penalties are identified.
Lease payments measured at the commencement date include fixed payments, in-substance fixed payments, variable lease payments dependent on a rate or index (using the index or rate in effect at lease commencement), any purchase option the lessee is reasonably certain to exercise, and payments of penalties for terminating the lease if the lease term reflects the lessee exercising the termination option. Fully variable lease payments without an in-substance fixed component are not included in the measurement of the lease liability and are recognized in the period in which the underlying contingency is resolved.
The lease liability is remeasured when the contract is modified, upon the resolution of a contingency such that variable payments become fixed or if our assessment of exercising an extension, termination or purchase option changes. Once remeasured, an adjustment is made to the ROU asset. However, if the carrying amount of the right-of-use asset is reduced to zero, any remaining amount of the remeasurement is recognized in earnings.
The ROU asset balance is initially measured as the lease liability amount, adjusted for any lease payments made prior to the commencement date, initial direct costs, estimated costs to dismantle, remove, or restore the underlying asset and incentives received.
Our current lessee lease portfolio is comprised primarily of operating leases. If we enter into a finance lease, the new leasing standard requires us to initially recognize and measure these leases using the same method as described above for operating leases. Subsequent to initial recognition, each lease payment would be allocated between interest expense and a reduction of the lease liability. This expense would be recognized over the lease term using the interest method to produce a constant periodic rate of interest on the remaining balance of the liability for each period and would be included in interest expense in our Consolidated Statements of Operations and Comprehensive Income (Loss). The ROU asset would be amortized on a straight-line basis over the lease term, with depreciation recorded in depreciation and amortization in our Consolidated Statements of Operations and Comprehensive Income (Loss).
Brookfield Property REIT Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)
The ROU assets in our operating leases are evaluated for impairment in a manner similar to our operating properties, as described below under "Impairment".
Lessor arrangements
At the inception of a new lease arrangement, including new leases that arise from amendments, we assess the terms and conditions to determine the proper lease classification. When the terms of a lease effectively transfer control of the underlying asset, the lease is classified as a sales-type lease. When a lease does not effectively transfer control of the underlying asset to the lessee, but we obtain a guarantee for the value of the asset from a third party, we classify the lease as a direct financing lease. All other leases are classified as operating leases. Control of the underlying asset is transferred to the lessee if any of the following criteria are met: (i) transfer of ownership to the lessee prior to or shortly after the end of the lease term, (ii) lessee has an option to purchase the underlying property that the lessee is reasonably certain to exercise, (iii) the lease term is for the major part of the underlying property’s remaining economic life, (iv) the present value of the sum of lease payments and any residual value guaranteed by the lessee that is not already reflected in the lease payments is equal to or exceeds substantially all of the fair value of the leased property or (v) the underlying property is of such a specialized nature that it is expected to have no alternative use at the end of the lease term. As of June 30, 2020, we do not have any material sales-type or direct financing leases.
For operating leases with minimum scheduled rent increases, we recognize rental income on a straight-line basis, including the effect of any free rent periods, over the lease term when collectability of lease payments (and, if applicable, any amounts necessary to satisfy a residual value guarantee) is probable. Variable lease payments are recognized as rental income in the period when the changes in facts and circumstances on which the variable lease payments are based occur. Variable lease payments include overage rent, which is paid by a tenant when the tenant's sales exceed an agreed upon minimum amount, is recognized once tenant sales exceed contractual tenant lease thresholds and is calculated by multiplying the sales in excess of the minimum amount by a percentage defined in the lease.
Our leases also contain provisions for tenants to reimburse us for real estate taxes and insurance, as well as for other property operating expenses, marketing costs, and utilities, which are considered to be non-lease components. These tenant reimbursements are most often established in the leases or in less frequent cases computed based upon a formula. We have elected the practical expedient to not separate non-lease components from the lease component for all classes of underlying assets and determined that the lease component is the predominant component in the contract; therefore, these recoveries are recognized in a manner similar to minimum rents and variable rents within rental revenues on our Consolidated Statements of Operations and Comprehensive Income (Loss).
Recognizing rental and related income on a straight-line basis results in a difference in the timing of revenue recognition from what is contractually due from tenants. Straight-line rents are recorded in accounts receivable, net in our Consolidated Balance Sheets. For leases where collectability of substantially all the lease payments is probable, we establish an allowance for doubtful accounts against the portion of accounts receivable, net, including straight-line rents, which is estimated to be uncollectible. Such estimates are based on our previous recovery experience and expectations of future lease concessions. Lease concessions are generally considered a lease modification and thus are recognized prospectively over the remaining lease term. However, the Company does include its estimate of potential lease concessions when establishing its general reserve, based on its best estimates of total lease concessions expected, recognizing the portion of the total concession that is deemed attributable to the current period through consideration of weighted average remaining lease terms. Changes in the general allowance are recognized in rental income on our Consolidated Statements of Operations and Comprehensive Income (Loss). If we determine that collectability of substantially all the lease payments is not probable, we record a current-period adjustment to rental income to amount of cash collected from the lessee. This adjustment effectively reduces cumulative income recognized since lease commencement from an accrual basis to cash basis. In addition, future revenue recognition is limited to amounts paid by the lessee. We will generally return to an accrual basis of accounting, if and when, all delinquent payments become current under the terms of the lease agreement and collectability of substantially all the remaining contractual lease payments is reasonably probable.
With respect to our consolidated properties, for the three and six months ended June 30, 2020, we have recorded $19.6 million and $22.9 million, respectively, associated with potentially uncollectible revenues, which includes $5.0 million and
Brookfield Property REIT Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)
$5.0 million, respectively, for straight-line rent receivables. With respect to our Unconsolidated Real Estate Affiliates, for the three and six months ended June 30, 2020, our Unconsolidated Real Estate Affiliates have recorded $28.0 million and $33.6 million, respectively, associated with potentially uncollectible revenues, which includes $7.0 million and $7.1 million, respectively, for straight-line rent receivables. Of these amounts for the three and six months ended June 30, 2020, our share totaled $12.7 million and $15.2 million, respectively, which includes $3.3 million and $3.3 million, respectively, for straight-line rent receivables.
As of June 30, 2020, the Company, including consideration of our share of Unconsolidated Real Estate Affiliates, has collected approximately 30% of second quarter rents, and collections continue to increase subsequent to quarter end. While working to preserve our profitability and cash flow, we are also working with our tenants regarding requests for lease concessions and other forms of assistance, although we have not executed a significant number of agreements. While we anticipate that we may grant further rent concessions, such as the deferral or abatement of lease payments, such rent concession requests are evaluated on a case-by-case basis. Not all requests for rent relief will be granted as the Company does not intend to forgo its legally enforceable contractual rights that exist under its lease agreements.
Rental revenues also includes lease termination income collected from tenants to allow for the tenant to vacate their space prior to their scheduled termination dates, as well as accretion related to above-market and below-market tenant leases on acquired properties and properties that were recorded at fair value at the emergence from bankruptcy.
In leasing tenant space, we may provide funding to the lessee through a tenant allowance. To account for a tenant allowance, we determine whether the allowance represents funding for the construction of leasehold improvements and evaluate the control and ownership of such improvements. If we are considered the owner of the leasehold improvements, we capitalize the amount of the tenant allowance and depreciate it over the shorter of the useful life of the leasehold improvements or the related lease term. If the tenant allowance represents a payment for a purpose other than funding leasehold improvements, or in the event we are not considered the owner of the leasehold improvements, the allowance is capitalized to deferred expenses and considered to be a lease incentive and is recognized over the lease term as a reduction of rental revenue on a straight-line basis.
Deferred expenses
The new leasing standard defines initial direct costs as incremental costs of a lease that would not have been incurred if the lease had not been obtained. These initial direct costs (consisting primarily of leasing commissions paid to third parties) are recognized as deferred expenses on our Consolidated Balance Sheet and are amortized using the straight-line method over the life of the leases. Other leasing costs which do not meet the definition of initial direct costs (consisting primarily of internal legal and leasing overhead costs) are expensed as incurred and included in property management and other costs in our Consolidated Statements of Operations and Comprehensive Income (Loss).
Management Fees and Other Corporate Revenues
Management fees and other corporate revenues primarily represent real estate management and leasing fees, development fees, financing fees and fees for other ancillary services performed for the benefit of certain of the Unconsolidated Real Estate Affiliates. Management fees are reported at 100% of the revenue earned from the joint venture in management fees and other corporate revenues on our Consolidated Statements of Operations and Comprehensive Income (Loss). Our share of the management fee expense incurred by the Unconsolidated Real Estate Affiliates is reported within equity in income of Unconsolidated Real Estate Affiliates on our Consolidated Statements of Operations and Comprehensive Income (Loss) and in property management and other costs in the Condensed Combined Statements of Income in Note 5. The following table summarizes the management fees from affiliates and our share of the management fee expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
Management fees from affiliates
|
$
|
26,565
|
|
|
$
|
38,050
|
|
|
$
|
61,903
|
|
|
$
|
79,238
|
|
|
|
Management fee expense
|
(5,619)
|
|
|
(12,013)
|
|
|
(16,904)
|
|
|
(24,530)
|
|
|
|
Net management fees from affiliates
|
$
|
20,946
|
|
|
$
|
26,037
|
|
|
$
|
44,999
|
|
|
$
|
54,708
|
|
|
Brookfield Property REIT Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)
Management Fee Expense
Following the BPY Transaction, certain Brookfield Asset Management Inc. ("BAM")-owned entities provide certain management and administration services to BPYU. BPYU and its affiliates pay a management fee based on market capitalization and metrics defined by management. For the first twelve months following closing of the BPY Transaction, BAM agreed to waive management fees payable by BPYU. Amounts payable for the three and six months ended June 30, 2020 were $3.4 million and $7.9 million, respectively.
Following the BPY Transaction, an affiliate of BAM is entitled to receive incentive distributions based on an amount by which quarterly distributions exceed specified target levels. There were no such amounts payable for the three and six months ended June 30, 2020 and 2019.
Impairment
Operating Properties
We regularly review our Consolidated Properties for potential impairment indicators whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairment indicators are assessed separately for each property and include, but are not limited to, significant decreases in real estate property net operating income, significant decreases in occupancy, debt maturities, changes in management's intent with respect to the properties and prevailing market conditions.
If an indicator of potential impairment exists, the property is tested for recoverability by comparing its carrying amount to the estimated future undiscounted cash flows. Although the carrying amount may exceed the estimated fair value of certain properties, a real estate asset is only considered to be impaired when its carrying amount cannot be recovered through estimated future undiscounted cash flows. To the extent an impairment provision is determined to be necessary, the excess of the carrying amount of the property over its estimated fair value is expensed to operations. In addition, the impairment provision is allocated proportionately to adjust the carrying amount of the asset group. The adjusted carrying amount, which represents the new cost basis of the property, is depreciated over the remaining useful life of the property.
Although we may market a property for sale, there can be no assurance that the transaction will be complete until the sale is finalized. However, GAAP requires us to utilize the Company's expected holding period of our properties when assessing recoverability. If we cannot recover the carrying value of these properties within the planned holding period, we will estimate the fair values of the assets and record impairment charges for properties when the estimated fair value is less than their carrying value.
Impairment indicators for pre-development costs, which are typically costs incurred during the beginning stages of a potential development and construction in progress, are assessed by project and include, but are not limited to, significant changes in the Company's plans with respect to the project, significant changes in projected completion dates, tenant demand, anticipated revenues or cash flows, development costs, market factors and sustainability of development projects.
Impairment charges are recorded in the Consolidated Statements of Operations and Comprehensive Income (Loss) when the carrying value of a property is not recoverable and it exceeds the estimated fair value of the property, which can occur in accounting periods preceding disposition and/or in the period of disposition.
During the three and six months ended June 30, 2020, we recorded a $71.5 million impairment charge on our Consolidated Statements of Comprehensive Income (Loss) related to one operating property.
During the three and six months ended June 30, 2019, we recorded a $184.3 million impairment charge on our Consolidated Statements of Comprehensive Income (Loss) related to one operating property as a result of a significant decrease in market leasing assumptions.
A significant judgment is made as to if and when impairment should be taken. The Company’s assessment of impairment as of June 30, 2020 was based on the most current information available to the Company. Based upon current market conditions,
Brookfield Property REIT Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)
certain of the Company’s properties may have fair values less than their carrying amounts. However, based on the Company’s plans with respect to those properties, the Company believes that their carrying amounts are recoverable and therefore, under applicable GAAP guidance, no impairment charges were recognized. If the operating conditions mentioned above deteriorate or if the Company’s expected holding period for assets change, subsequent tests for impairment could result in impairment charges in the future.
Investment in Unconsolidated Real Estate Affiliates
A series of operating losses of an investee or other factors may indicate that an other-than-temporary decline in value of our investment in an Unconsolidated Real Estate Affiliate has occurred. The investment in each of the Unconsolidated Real Estate Affiliates is evaluated for valuation declines below the carrying amount. Accordingly, in addition to the property-specific impairment analysis that we performed for such joint ventures (as part of our operating property impairment process described above), we also considered whether there were other-than-temporary declines with respect to the carrying values of our Unconsolidated Real Estate Affiliates. Refer to Note 5 for more information.
Concentrations of Credit Risk
Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and cash equivalents. We are exposed to credit risk with respect to cash held at various financial institutions and access to our credit facility. Our credit risk exposure with regard to our cash and the $1.5 billion available under our credit facility is spread among a diversified group of investment grade financial institutions. We had $1.1 billion and $715.0 million outstanding under our credit facility as of June 30, 2020 and December 31, 2019, respectively.
Recently Issued Accounting Pronouncements
Due to the business disruptions and challenges severely affecting the global economy caused by the COVID-19 pandemic ("COVID-19" or "the global economic shutdown" or "the shutdown"), lessors may provide rent deferrals and other lease concessions to lessees. In April 2020, the Financial Accounting Standards Board ("FASB") staff issued a question and answer document (the "Lease Modification Q&A") focused on the application of lease accounting guidance to lease concessions provided as a result of the global economic shutdown. Under existing lease guidance, economic relief that is agreed to or negotiated outside of the original lease agreement is typically considered a lease modification, in which case both the lessee and lessor would be required to apply the respective modification frameworks. However, if the lessee was entitled to the economic relief because of either contractual or legal rights, the relief would be accounted for outside of the modification framework. Although the original lease modification guidance in ASC 842, Leases remain appropriate to address routine lease modifications, the Lease Modification Q&A established a different framework to account for certain lease concessions granted in response to the global economic shutdown. The Lease Modification Q&A allows the Company, if certain criteria have been met, to make an accounting policy election to account for COVID-19 related lease concessions as either a lease modification or a negative variable adjustment to rental revenue. Such election is required to be applied consistently to leases with similar characteristics and similar circumstances.
The Company has elected to apply such relief and will avail itself of the election to treat leases as lease modifications, thereby avoiding performing a lease by lease analysis for the lease concessions that were (1) granted as relief due to the shutdown and (2) result in the cash flows remaining substantially the same or less than the original contract.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326: Measurement of Credit Losses on Financial Instruments), which changes the model for the measurement of credit losses on financial instruments. Specifically, the amendments in the ASU replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. In November 2018, the FASB issued 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, which clarifies that receivables arising from operating leases are not within the scope of this new guidance. The Company adopted this standard on January 1, 2020 which did not materially impact its consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement. Public entities will be required to disclose the following: (i) the changes in unrealized gains and losses for the period included in other comprehensive income for recurring
Brookfield Property REIT Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)
Level 3 fair value measurements held at the end of the reporting period and (ii) the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. In addition, public entities will no longer be required to disclose the following: (i) the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, (ii) the policy for timing of transfers between levels and (iii) the valuation processes for Level 3 fair value measurements. The new pronouncement also clarifies and modifies certain existing provisions, including eliminating "at a minimum" from the phrase "an entity shall disclose at a minimum" to promote the appropriate exercise of discretion by entities when considering fair value measurement disclosures and clarifying that materiality is an appropriate consideration when evaluating disclosure requirements. The Company adopted this standard on January 1, 2020 which did not materially impact its consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform. This temporary guidance is effective as of March 12, 2020 through December 31, 2022 to ease potential burdens related to the accounting for, or recognizing the effects of, reference rate reform on financial reporting. The guidance provides optional expedients for applying existing GAAP to contract modifications and hedging relationships affected by the move of global capital markets away from interbank offered rates, most notably the London Interbank Offered Rate (LIBOR). The Company has not adopted any of the optional expedients or exceptions as of June 30, 2020, but will continue to evaluate the possible adoption of any such expedients or exceptions during the effective period as circumstances evolve.
Use of Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. For example, estimates and assumptions have been made with respect to allocating the purchase price of real estate acquisitions, the useful lives of assets, capitalization of development and leasing costs, provision for income taxes, recoverable amounts of receivables and deferred taxes, provision for loan loss, initial valuations and related amortization periods of deferred costs and intangibles, particularly with respect to acquisitions, impairment of long-lived assets, litigation related accruals and disclosures and fair value of debt. Actual results could differ from these and other estimates.
NOTE 3 ACQUISITIONS, SALES AND JOINT VENTURE ACTIVITY
On May 27, 2020, the Company completed a restructuring with respect to Water Tower Place with its joint venture partner for nominal consideration and assumption of the partner’s share of the debt, resulting in the Company obtaining control of the entity with a total ownership percentage for the Company of 93.93%. Accordingly, the Company recognized a loss of $15.4 million included in loss from changes in control of investment properties on the Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and six months ended June 30, 2020.
On March 11, 2020, BPR Nimbus LLC (an indirect subsidiary of the Company) purchased 690,427 shares of Series B Convertible Preferred Stock in Camp NYC, Inc. (par value $0.01 per share) at a price of approximately of $7.24 per share, for a $5.0 million total investment, resulting in a 5.5% ownership interest in Camp NYC, Inc. The investment is accounted for using the cost method (adjusted for impairment and observable price changes) as the Company has neither control nor significant influence over Camp NYC, Inc. and is included in Investment in Unconsolidated Real Estate Affiliates on the Consolidated Balance Sheets.
On February 21, 2020, the Company completed the sale of eight outparcels for a gross sales price of $12.1 million, which resulted in a gain of $7.8 million included in Other Revenues on the Consolidated Statements of Operations and Comprehensive Income (Loss) for the six months ended June 30, 2020. All of the eight outparcels were located at consolidated entities.
On February 7, 2020, our joint venture partner at the SoNo Collection contributed $70.8 million in additional capital to the joint venture, resulting in a dilution of the Company’s ownership interest from 17.0% to 12.9%.
On January 14, 2020, BPR Cumulus LLC (an indirect subsidiary of the Company) purchased 758,725 shares of Common Stock in Allied Esports Entertainment, Inc. (par value $0.01 per share) at a price of $6.59 per share, for a $5.0 million total investment. The investment was marked to fair value as of June 30, 2020, which resulted in a gain of $0.4 million and a loss of
Brookfield Property REIT Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)
$3.4 million included in Unconsolidated Real Estate Affiliates - (loss) gain on investment, net on the Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and six months ended June 30, 2020, respectively. This investment resulted in a 3.2% ownership interest in Allied Esports Entertainment, Inc. The investment is accounted for at fair value as the Company has neither control nor significant influence over Allied Esports Entertainment, Inc. and is included in Investment in Unconsolidated Real Estate Affiliates on the Consolidated Balance Sheets.
On January 9, 2020, the Company completed the sale of its 27.0% interest in Aero OpCo LLC ("Aeropostale") for a gross sales price of $36.0 million, which resulted in a gain on the sale of $15.1 million included in Unconsolidated Real Estate Affiliates - (loss) gain on investment, net on the Consolidated Statements of Operations and Comprehensive Income (Loss) for the six months ended June 30, 2020.
On January 9, 2020, the Company completed the sale of its 1.2% interest in Authentic Brands Group LLC ("ABG") for a gross sales price of $33.5 million, which resulted in a gain on the sale of $1.4 million included in Unconsolidated Real Estate Affiliates - (loss) gain on investment, net on the Consolidated Statements of Operations and Comprehensive Income (Loss) for the six months ended June 30, 2020.
On April 19, 2019, BPR Cumulus LLC (an indirect subsidiary of the Company) purchased 1,250,000 shares of Series F Convertible Preferred Stock in Pinstripes, Inc. (par value $0.01 per share) at a price of $8.00 per share, for a $10.0 million total investment, resulting in a 7.6% ownership interest in Pinstripes, Inc. The investment is accounted for using the cost method as the Company has neither control nor significant influence over Pinstripes, Inc. and is included in Investment in Unconsolidated Real Estate Affiliates on the Consolidated Balance Sheets.
In connection with the formation of the BPR-FF JV LLC joint venture described below, the Company agreed to use reasonable efforts to cause a transfer to BPRFF JV LLC of the legal rights it held in the Seritage Venture at Coronado Center Mall at an agreed upon value of $53.1 million. On April 9, 2019, the Company transferred its rights in the Sears Anchor Parcel at Coronado Center Mall to Coronado Center LLC. No gain or loss was recognized on the transaction.
On January 7, 2019, the Company completed the sale of its 12.0% interest in Bayside Marketplace for a sales price of $42.0 million. Due to cumulative distributions received in excess of its investment, the Company had a liability balance associated with its investment in Bayside Marketplace. Accordingly, the Company recognized a gain of $104.4 million included in Unconsolidated Real Estate Affiliates - (loss) gain on investment, net on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the six months ended June 30, 2019.
NOTE 4 FAIR VALUE
Nonrecurring Fair Value Measurements
We estimate fair value relating to impairment assessments based upon discounted cash flow and direct capitalization models that include all projected cash inflows and outflows over a specific holding period, or the negotiated sales price, if applicable. Such projected cash flows are comprised of contractual rental revenues and forecasted rental revenues and expenses based upon market conditions and expectations for growth. Capitalization rates and discount rates utilized in these models are based on a reasonable range of current market rates for each property analyzed. Based upon these inputs, we determined that our valuations of properties using a discounted cash flow or a direct capitalization model were classified within Level 3 of the fair value hierarchy. For our properties for which the estimated fair value was based on negotiated sales prices, we determined that our valuation was classified within Level 2 of the fair value hierarchy.
The following table summarizes certain of our assets that are measured at fair value on a nonrecurring basis as a result of impairment charges recorded. During the three and six months ended June 30, 2020, we recognized $71.5 million in impairment charges. During the three and six months ended June 30, 2019, we recognized $184.3 million in impairment charges.
Brookfield Property REIT Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fair Value Measurement
|
|
Quoted Prices in
Active Markets
for Identical Assets
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable Inputs
(Level 3)
|
|
Provisions for Impairment
|
|
Three and six months ended June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
Investments in real estate (1)
|
$
|
86,337
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
86,337
|
|
|
$
|
71,455
|
|
|
Three and six months ended June 30, 2019
|
|
|
|
|
|
|
|
|
|
|
Investments in real estate (1)
|
$
|
180,394
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
180,394
|
|
|
$
|
184,347
|
|
(1) The impairment recorded on the Investments in real estate balance represents a loss incurred at a consolidated property. Refer to Note 5 for information regarding the impairment loss recorded on our Unconsolidated Real Estate Affiliates.
|
|
|
|
|
|
|
|
|
|
|
Unobservable Quantitative Input
|
|
Rate
|
|
Three and six months ended June 30, 2020
|
|
|
|
Discount rate
|
|
10.75%
|
|
Terminal capitalization rate
|
|
9.50%
|
|
Three and six months ended June 30, 2019
|
|
|
|
Discount rates
|
|
5.50%
|
|
Terminal capitalization rate
|
|
4.00%
|
Disclosure of Fair Value of Financial Instruments
The fair values of our financial instruments approximate their carrying amount in our consolidated financial statements except for debt. Management's estimates of fair value are presented below for our debt as of June 30, 2020 and December 31, 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020
|
|
|
|
December 31, 2019
|
|
|
|
|
|
Carrying Amount (1)
|
|
Estimated Fair
Value
|
|
Carrying Amount (2)
|
|
Estimated Fair
Value
|
|
Fixed-rate debt
|
|
$
|
8,880,100
|
|
|
$
|
8,800,443
|
|
|
$
|
8,627,332
|
|
|
$
|
8,631,704
|
|
|
Variable-rate debt
|
|
7,720,175
|
|
|
7,763,613
|
|
|
7,275,562
|
|
|
7,355,744
|
|
|
|
|
$
|
16,600,275
|
|
|
$
|
16,564,056
|
|
|
$
|
15,902,894
|
|
|
$
|
15,987,448
|
|
(1) Includes net market rate adjustments of $3.9 million and deferred financing costs of $115.7 million, net.
(2) Includes net market rate adjustments of $4.7 million and deferred financing costs of $131.8 million, net.
The fair value of our junior subordinated notes approximates their carrying amount as of June 30, 2020 and December 31, 2019. We estimated the fair value of mortgages, notes and other loans payable using Level 2 and Level 3 inputs based on recent financing transactions, estimates of the fair value of the property that serves as collateral for such debt, historical risk premiums for loans of comparable quality, current LIBOR, U.S. treasury obligation interest rates and on the discounted estimated future cash payments to be made on such debt. The discount rates estimated reflect our judgment as to what the approximate current lending rates for loans or groups of loans with similar maturities and assume that the debt is outstanding through maturity. We have utilized market information as available or present value techniques to estimate the amounts required to be disclosed. Since such amounts are estimates that are based on limited available market information for similar transactions and do not acknowledge transfer or other repayment restrictions that may exist in specific loans, it is unlikely that the estimated fair value of any such debt could be realized by immediate settlement of the obligation.
Brookfield Property REIT Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)
NOTE 5 UNCONSOLIDATED REAL ESTATE AFFILIATES
Following is summarized financial information for all of our real estate related Unconsolidated Real Estate Affiliates accounted for using the equity method and a reconciliation to our total investment in Unconsolidated Real Estate Affiliates. The reconciliation to our total investment in Unconsolidated Real Estate Affiliates is inclusive of investments accounted for using the cost method (adjusted for impairment and observable price changes) (Note 2).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020
|
|
December 31, 2019
|
|
Condensed Combined Balance Sheets - Unconsolidated Real Estate Affiliates
|
|
|
|
|
Assets:
|
|
|
|
|
Land
|
$
|
3,467,249
|
|
|
$
|
3,458,485
|
|
|
Buildings and equipment
|
21,988,301
|
|
|
22,119,745
|
|
|
Less accumulated depreciation
|
(4,407,139)
|
|
|
(4,303,109)
|
|
|
Construction in progress
|
406,748
|
|
|
657,170
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment in real estate
|
21,455,159
|
|
|
21,932,291
|
|
|
Cash and cash equivalents
|
525,362
|
|
|
662,879
|
|
|
Accounts receivable, net
|
654,513
|
|
|
344,946
|
|
|
Notes receivable
|
23,335
|
|
|
22,497
|
|
|
Deferred expenses, net
|
409,466
|
|
|
428,460
|
|
|
Prepaid expenses and other assets
|
581,444
|
|
|
692,407
|
|
|
Total assets
|
$
|
23,649,279
|
|
|
$
|
24,083,480
|
|
|
Liabilities and Owners' Equity:
|
|
|
|
|
Mortgages, notes and loans payable
|
$
|
14,775,729
|
|
|
$
|
15,173,099
|
|
|
Accounts payable, accrued expenses, and other liabilities
|
927,494
|
|
|
1,079,915
|
|
|
|
|
|
|
|
Cumulative effect of foreign currency translation ("CFCT")
|
(32,450)
|
|
|
(9,985)
|
|
|
Owners' equity, excluding CFCT
|
7,978,506
|
|
|
7,840,451
|
|
|
Total liabilities and owners' equity
|
$
|
23,649,279
|
|
|
$
|
24,083,480
|
|
|
Investment in Unconsolidated Real Estate Affiliates, Net:
|
|
|
|
|
Owners' equity
|
$
|
7,946,056
|
|
|
$
|
7,830,466
|
|
|
Less: joint venture partners' equity
|
(4,450,292)
|
|
|
(4,357,244)
|
|
|
Plus: excess investment/basis differences
|
833,495
|
|
|
954,262
|
|
|
Investment in Unconsolidated Real Estate Affiliates, net (equity method)
|
4,329,259
|
|
|
4,427,484
|
|
|
Investment in Unconsolidated Real Estate Affiliates, net (securities)
|
35,050
|
|
|
57,061
|
|
|
Retail investment, net
|
—
|
|
|
24,182
|
|
|
Investment in Unconsolidated Real Estate Affiliates, net
|
$
|
4,364,309
|
|
|
$
|
4,508,727
|
|
|
Reconciliation - Investment in Unconsolidated Real Estate Affiliates:
|
|
|
|
|
Asset - Investment in Unconsolidated Real Estate Affiliates
|
$
|
4,495,267
|
|
|
$
|
4,634,292
|
|
|
Liability - Investment in Unconsolidated Real Estate Affiliates
|
(130,958)
|
|
|
(125,565)
|
|
|
Investment in Unconsolidated Real Estate Affiliates, net
|
$
|
4,364,309
|
|
|
$
|
4,508,727
|
|
Brookfield Property REIT Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
Condensed Combined Statements of Income (Loss) - Unconsolidated Real Estate Affiliates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental revenues, net
|
|
$
|
493,673
|
|
|
$
|
621,741
|
|
|
$
|
1,044,268
|
|
|
$
|
1,262,777
|
|
|
|
|
|
|
Condominium sales
|
|
—
|
|
|
—
|
|
|
16,215
|
|
|
—
|
|
|
|
|
|
|
Other
|
|
7,810
|
|
|
18,470
|
|
|
25,955
|
|
|
33,836
|
|
|
|
|
|
|
Total revenues
|
|
501,483
|
|
|
640,211
|
|
|
1,086,438
|
|
|
1,296,613
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate taxes
|
|
52,681
|
|
|
60,461
|
|
|
111,040
|
|
|
122,582
|
|
|
|
|
|
|
Property maintenance costs
|
|
10,728
|
|
|
12,463
|
|
|
23,658
|
|
|
28,140
|
|
|
|
|
|
|
Marketing
|
|
2,788
|
|
|
3,745
|
|
|
9,114
|
|
|
9,819
|
|
|
|
|
|
|
Other property operating costs
|
|
59,521
|
|
|
83,339
|
|
|
135,504
|
|
|
162,891
|
|
|
|
|
|
|
Condominium cost of sales
|
|
6
|
|
|
—
|
|
|
9,924
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property management and other costs (1)
|
|
13,684
|
|
|
26,961
|
|
|
39,193
|
|
|
56,004
|
|
|
|
|
|
|
General and administrative
|
|
563
|
|
|
464
|
|
|
970
|
|
|
2,131
|
|
|
|
|
|
|
Provision for impairment
|
|
83,917
|
|
|
—
|
|
|
83,917
|
|
|
—
|
|
|
|
|
|
|
Depreciation and amortization
|
|
223,059
|
|
|
262,917
|
|
|
452,209
|
|
|
526,316
|
|
|
|
|
|
|
Total operating expenses
|
|
446,947
|
|
|
450,350
|
|
|
865,529
|
|
|
907,883
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
1,163
|
|
|
3,213
|
|
|
3,715
|
|
|
5,495
|
|
|
|
|
|
|
Interest expense
|
|
(163,794)
|
|
|
(176,073)
|
|
|
(333,612)
|
|
|
(349,672)
|
|
|
|
|
|
|
Benefit from (provision for) income taxes
|
|
(328)
|
|
|
180
|
|
|
(831)
|
|
|
(389)
|
|
|
|
|
|
|
Equity in loss of unconsolidated joint ventures
|
|
—
|
|
|
(8,511)
|
|
|
—
|
|
|
(17,244)
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
(108,423)
|
|
|
8,670
|
|
|
(109,819)
|
|
|
26,920
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation to noncontrolling interests
|
|
(12)
|
|
|
(13)
|
|
|
(24)
|
|
|
(27)
|
|
|
|
|
|
|
Net income (loss) attributable to the ventures
|
|
$
|
(108,435)
|
|
|
$
|
8,657
|
|
|
$
|
(109,843)
|
|
|
$
|
26,893
|
|
|
|
|
|
|
Equity In Loss of Unconsolidated Real Estate Affiliates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to the ventures
|
|
$
|
(108,435)
|
|
|
$
|
8,657
|
|
|
$
|
(109,843)
|
|
|
$
|
26,893
|
|
|
|
|
|
|
Joint venture partners' share of (income) loss
|
|
58,733
|
|
|
(3,565)
|
|
|
62,531
|
|
|
(12,626)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on retail investment
|
|
—
|
|
|
916
|
|
|
—
|
|
|
(4,536)
|
|
|
|
|
|
|
Amortization of capital or basis differences
|
|
(6,724)
|
|
|
(13,846)
|
|
|
(13,957)
|
|
|
(25,442)
|
|
|
|
|
|
|
Equity in loss of Unconsolidated Real Estate Affiliates
|
|
$
|
(56,426)
|
|
|
$
|
(7,838)
|
|
|
$
|
(61,269)
|
|
|
$
|
(15,711)
|
|
|
|
|
|
(1) Includes management fees charged to the unconsolidated joint ventures by BPRRS and BPRI.
The Unconsolidated Real Estate Affiliates represent our investments in real estate joint ventures that are not consolidated. We hold interests in 25 domestic joint ventures, comprising 59 U.S. retail properties and one joint venture in Brazil. Generally, we share in the profits and losses, cash flows and other matters relating to our investments in Unconsolidated Real Estate Affiliates in accordance with our respective ownership percentages. We manage most of the properties owned by these joint ventures. We account for investments in joint ventures where we own a non-controlling joint interest using either the equity method or the cost method (adjusted for impairment and observable price changes). If we have significant influence but not control over the investment, we utilize the equity method. If we have neither control nor significant influence, we utilize the cost method. If we control the joint venture, we account for the venture as a consolidated investment.
Brookfield Property REIT Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)
As of June 30, 2020, the balance of ROU assets was $68.3 million, net and lease liabilities of $70.4 million for 24 ground leases in the Condensed Combined Balance Sheets - Unconsolidated Real Estate Affiliates under Topic 842, included in prepaid expenses and other assets and accounts payable, accrued expenses, and other liabilities, respectively. As of December 31, 2019, the balance of ROU assets was $68.9 million, net and lease liabilities was $71.0 million for 24 ground leases in the Condensed Combined Balance Sheets - Unconsolidated Real Estate Affiliates under Topic 842, included in prepaid expenses and other assets and accounts payable, accrued expenses, and other liabilities, respectively. All of these leases are operating leases; we do not have any finance leases.
On May 27, 2020, the Company acquired an additional ownership interest of 49.5% in the Water Tower Joint Venture from its joint venture partner for nominal consideration. Following this, the Company has a 93.93% ownership interest in the joint venture and its wholly owned subsidiary.
During the three and six months ended June 30, 2020, we recorded $83.9 million of impairment charges on our Condensed Combined Statements of Income (Loss) - Unconsolidated Real Estate Affiliates related to two operating properties.
Unconsolidated Mortgages, Notes and Loans Payable, and Retained Debt
Our proportionate share of the mortgages, notes and loans payable of the unconsolidated joint ventures was $7.0 billion as of June 30, 2020 and $7.2 billion as of December 31, 2019, including Retained Debt (as defined below). There can be no assurance that the Unconsolidated Properties will be able to refinance or restructure such debt on acceptable terms or otherwise, or that joint venture operations or contributions by us and/or our partners will be sufficient to repay such loans.
On February 28, 2020, the Company closed a new loan at the Miami Design District joint venture in the amount of $500.0 million with an interest rate of 4.13%, which matures on March 1, 2030. The loan replaced the previous debt of $480.0 million with an interest rate of LIBOR plus 2.50% that was scheduled to mature on May 14, 2021. As a result of the refinancing, the joint venture incurred $3.7 million of deferred financing costs that were capitalized.
During the quarter ended June 30, 2020, the Company suspended making contractual interest and/or principal payments on seven property level mortgages, resulting in these mortgages being in default as of June 30, 2020. The Company is currently engaging in negotiations with the creditors on these mortgages to obtain potential lender concessions or other relief. If the Company is unsuccessful in obtaining concessions from these creditors and the defaults are not cured, it is possible that the property securing these loans would be transferred to the lenders. These mortgages are non-recourse and the creditors do not have security claims against the Company aside from the collateral property. In total at share, as of June 30, 2020, the Company has a total of $466.5 million of property level mortgages in default and the related Investment in Real Estate securing these loans has a carrying value of $450.3 million.
We have debt obligations in excess of our pro rata share of the debt for one of our Unconsolidated Real Estate Affiliates ("Retained Debt"). This Retained Debt represents distributed debt proceeds of the Unconsolidated Real Estate Affiliates in excess of our pro rata share of the non-recourse mortgage indebtedness. The proceeds of the Retained Debt which were distributed to us are included as a reduction in our investment in Unconsolidated Real Estate Affiliates. We had Retained Debt of $80.6 million at one property as of June 30, 2020, and $81.5 million as of December 31, 2019. We are obligated to contribute funds on an ongoing basis, as needed, to our Unconsolidated Real Estate Affiliates in amounts sufficient to pay debt service on such Retained Debt. If we do not contribute such funds, our interest in or our distributions from such Unconsolidated Real Estate Affiliates could be reduced to the extent of such deficiencies. As of June 30, 2020, we do not anticipate an inability to perform on our obligations with respect to Retained Debt.
Brookfield Property REIT Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)
NOTE 6 MORTGAGES, NOTES AND LOANS PAYABLE
Mortgages, notes and loans payable and the weighted-average interest rates are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020 (1)
|
|
Weighted-Average
Interest Rate (2)
|
|
December 31, 2019 (3)
|
|
Weighted-Average
Interest Rate (2)
|
|
Fixed-rate debt:
|
|
|
|
|
|
|
|
|
|
Collateralized mortgages, notes and loans payable
|
|
$
|
7,944,579
|
|
|
4.15
|
%
|
|
$
|
7,638,697
|
|
|
4.21
|
%
|
|
Senior secured notes - silver bonds
|
|
935,521
|
|
|
5.75
|
%
|
|
988,635
|
|
|
5.75
|
%
|
|
Total fixed-rate debt
|
|
8,880,100
|
|
|
4.32
|
%
|
|
8,627,332
|
|
|
4.39
|
%
|
|
Variable-rate debt:
|
|
|
|
|
|
|
|
|
|
Collateralized mortgages, notes and loans payable (4)
|
|
2,578,532
|
|
|
3.25
|
%
|
|
2,594,182
|
|
|
4.20
|
%
|
|
Unsecured corporate debt (5)
|
|
5,141,643
|
|
|
2.54
|
%
|
|
4,681,380
|
|
|
4.16
|
%
|
|
Total variable-rate debt
|
|
7,720,175
|
|
|
2.78
|
%
|
|
7,275,562
|
|
|
4.17
|
%
|
|
Total Mortgages, notes and loans payable
|
|
$
|
16,600,275
|
|
|
3.60
|
%
|
|
$
|
15,902,894
|
|
|
4.29
|
%
|
|
Junior subordinated notes
|
|
$
|
206,200
|
|
|
2.21
|
%
|
|
$
|
206,200
|
|
|
3.39
|
%
|
(1) Includes $3.9 million of market rate adjustments and $115.7 million of deferred financing costs, net.
(2) Represents the weighted-average interest rates on our principal balances, excluding the effects of market rate adjustments and deferred financing costs.
(3) Includes $4.7 million of market rate adjustments and $131.8 million of deferred financing costs, net.
(4) $1.3 billion of the variable-rate balance is cross-collateralized.
(5) Includes deferred financing costs, which are shown as a reduction to the debt balance. See table below for the balance excluding deferred financing costs.
Collateralized Mortgages, Loan Extension, Notes and Loans Payable
As of June 30, 2020, $15.9 billion of land, buildings and equipment (before accumulated depreciation) and construction in progress have been pledged as collateral for our mortgages, notes and loans payable. Certain of these consolidated secured loans, representing $1.3 billion of debt, are cross-collateralized. Although a majority of the $10.5 billion of fixed and variable rate collateralized mortgages, notes and loans payable are non-recourse, $730.8 million of such mortgages, notes and loans payable are recourse to the Company as guarantees on secured financings. In addition, certain mortgage loans contain other credit enhancement provisions which have been provided by BPYU. Certain mortgages, notes and loans payable may be prepaid but are generally subject to a prepayment penalty equal to a yield-maintenance premium, defeasance or a percentage of the loan balance.
During the quarter ended June 30, 2020, the Company suspended making contractual interest and/or principal payments on five property level mortgages, resulting in these mortgages being in default as of June 30, 2020. The Company is currently engaging in negotiations with the creditors on these mortgages to obtain potential lender concessions or other relief. If the Company is unsuccessful in obtaining concessions from these creditors and the defaults are not cured, it is possible that the property securing these loans would be transferred to the lenders. These mortgages are non-recourse and the creditors do not have security claims against the Company aside from the collateral property. In total, as of June 30, 2020, the Company has a total of $691.5 million of property level mortgages in default and the related Investment in Real Estate securing these loans has a carrying value of $674.8 million.
On April 24, 2020, the Company completed a one-year extension of a $1.3 billion loan secured by cross-collateralized mortgages on 15 properties with an interest rate of LIBOR plus 1.75%, which matures on April 25, 2021. An extension fee of $1.6 million was paid in conjunction with the extension.
Brookfield Property REIT Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)
During the year ended December 31, 2019, the Company completed the following transactions:
•New loan at Shops at Merrick Park in the amount of $390.0 million with an interest rate of 3.90% which matures on November 1, 2024. The loan replaced previous debt of $161.0 million with an interest rate of 5.73% that was scheduled to mature on April 1, 2021. In connection with the refinancing, the Company incurred prepayment penalties of $7.9 million. As the refinancing plan was contemplated in connection with the acquisition of the property, such fees were factored in to the fair value of debt recognized on the consolidation date.
•New loans at Park Meadows in the amount of $700.0 million which mature on November 1, 2024. These loans consist of a senior loan in the amount of $615.0 million with an interest rate of 3.18% and a mezzanine loan in the amount of $85.0 million with an interest rate of 6.25%. These loans replaced previous debt of $360.0 million with an interest rate of 4.6% that was scheduled to mature on December 1, 2023. In connection with the refinancing, the Company incurred prepayment penalties of $35.6 million. As the refinancing plan was contemplated in connection with the acquisition of the property, such fees were factored in to the fair value of debt recognized on the consolidation date.
•New loan at Park City Center in the amount of $135.0 million with an interest rate of LIBOR plus 3.00% which matures on September 9, 2021. This loan replaced the previous debt of $172.2 million that matured June 6, 2019 and included a pay down of the existing mezzanine loan in the amount of $36.8 million. For the period between the maturity date of the previous debt and the effective date of the new loan, the Company extended forbearance and paid forbearance fees in total amount of $0.5 million.
•New loans at 730 Fifth Avenue in the amount of $807.5 million which mature on September 1, 2024. The loans consist of a senior loan in amount of $587.3 million with a 5-year term at LIBOR plus 3.00%, a senior mezzanine loan in amount of $97.9 million with a 5-year term at LIBOR plus 4.25%, and a junior loan in amount of $122.3 million with a 5-year term at LIBOR plus 5.50%. The loans replaced the previous debt of $720.0 million that was previously extended to August 27, 2019 and included a pay down of $180.0 million on June 28, 2019.
•New loan at Westlake Center in the amount of $48.8 million with an interest rate of LIBOR plus 2.50% which matures on July 10, 2021. This loan replaced the previous debt of $42.5 million that matured July 10, 2019.
•New loans at The Woodlands Mall in the amount of $465.0 million which mature on August 1, 2029. This consists of a $425.0 million loan with an interest rate of 4.25% and a $40.0 million loan with an interest rate of 5.50%. The loans have a weighted average interest rate of 4.36%. The loans replaced previous debt at the property of $294.0 million with a weighted average interest rate of 4.83% that were scheduled to mature on June 10, 2023. In connection with the refinancing, the Company incurred a prepayment penalty of $27.5 million which is recorded as a loss on extinguishment of debt on the Consolidated Statements of Operations and Comprehensive Income for the year ended December 31, 2019.
•One year loan extension at 830 North Michigan Avenue. A principal repayment of $7.0 million was made in conjunction with the extension.
•One-year extension of a $1.3 billion loan secured by cross-collateralized mortgages on 15 properties with an interest rate of LIBOR plus 1.75%, which matures on April 25, 2020. A principal repayment of $10.1 million was made in conjunction with the extension.
Brookfield Property REIT Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)
Corporate and Other Unsecured Loans
We have certain debt obligations, the terms of which are described below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020 (1)
|
|
Weighted-Average
Interest Rate
|
|
December 31, 2019 (2)
|
|
Weighted-Average
Interest Rate
|
|
Corporate debt:
|
|
|
|
|
|
|
|
|
|
Senior secured corporate debt
|
|
$
|
5,218,836
|
|
|
2.54
|
%
|
|
$
|
4,769,510
|
|
|
4.16
|
%
|
|
Senior secured notes - silver bonds
|
|
945,360
|
|
|
5.75
|
%
|
|
999,950
|
|
|
5.75
|
%
|
|
Total corporate debt
|
|
$
|
6,164,196
|
|
|
3.03
|
%
|
|
5,769,460
|
|
|
4.44
|
%
|
(1) Excludes deferred financing costs of $87.0 million in 2020 that decrease the total amount that appears outstanding in our Consolidated Balance Sheets.
(2) Excludes deferred financing costs of $99.4 million in 2019 that decrease the total amount that appears outstanding in our Consolidated Balance Sheets.
On May 24, 2020, the Company executed a series of transactions to repurchase corporate debt on the open market, funded by intercompany loans from BPY. The total amounts of debt repurchased had a par value of $59.6 million, and a cash repurchase price of $45.3 million. Following each repurchase, the repurchased debt is formally cancelled. As a result of the debt repurchase and cancellation, the Company recognized a gain of $14.3 million included in Gain on extinguishment of debt on the Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and six months ended June 30, 2020.
On May 1, 2019, the Company and BPR Cumulus LLC, BPR Nimbus LLC and GGSI Sellco LLC (each, an indirect subsidiary of the Company) issued $1.0 billion aggregate principal amount of 5.75% Senior Secured Notes - Silver Bonds due 2026. The notes bear interest at an annual rate of 5.75% payable on May 15 and November 15 of each year, beginning on November 15, 2019 and will mature on May 15, 2026. During the last quarter of 2019, the Company made a principal payment in amount of $50 thousand. During the quarter ended June 30, 2020, the Company made additional principal payments totaling $54.6 million. The total outstanding balance of the notes as of June 30, 2020 is $945.4 million.
On March 25, 2019, the Company secured a $341.8 million subordinated unsecured note with Brookfield BPY Holdings Inc., a related party. The note bore interest at a rate equal to LIBOR plus 2.75% and was scheduled to mature on March 25, 2029. During the year ended December 31, 2019, the Company repaid this loan in full. The Company borrowed an additional $70.5 million during the second quarter of 2019, with a maturity date of June 25, 2029. During the year ended December 31, 2019, the Company made principal payments totaling $68.0 million. The Company borrowed an additional $31.7 million during the last quarter of 2019 which was due on January 6, 2020 and has been repaid. On February 10, 2020, the Company secured an additional $27.0 million subordinated unsecured note with Brookfield BPY Holdings Inc, and another $29.0 million note on March 25, 2020. The notes bear interest at rate equal to LIBOR plus 2.75%, and mature on February 10, 2030 and March 25, 2030, respectively. On May 19, 2020 the Company secured an additional $25.0 million subordinated unsecured note with Brookfield BPY Holdings Inc., and another $45.0 million on May 22, 2020. The notes were repaid in full on June 18, 2020 and July 16, 2020, respectively. On June 25, 2020 the Company secured another $25.0 million subordinated unsecured note at interest rate equal to LIBOR plus 1.94%, and a maturity date on August 27, 2022. The total outstanding balance of the notes as of June 30, 2020 is $128.5 million.
The Company entered into a new credit agreement (the "Credit Agreement") dated as of August 24, 2018 consisting of a revolving credit facility (the "Facility"), Term A-1 and A-2 loans, and a Term B loan. The Facility provides for revolving loans of up to $1.5 billion and borrowings bear interest at a rate equal to LIBOR plus 2.25%. The Facility is scheduled to mature in August 2022 and had outstanding borrowings of $1.1 billion as of June 30, 2020. The Term A-1 Loan has a total commitment outstanding of $900.0 million, with $700.0 million attributable to BPYU and $200.0 million attributable to an affiliate, and is scheduled to mature in August 2021, bearing interest at a rate equal to LIBOR plus 2.25%. During the quarter ended June 30, 2020, the Company didn't make principal payments, and the remaining outstanding balance was $34.8 million. The Term A-2 Loan has a total commitment outstanding of $2.0 billion and is scheduled to mature in August 2023, bearing interest at a rate equal to LIBOR plus 2.25%, and the outstanding balance at June 30, 2020 was $2.0 billion. The Term B Loan has a total commitment outstanding of $2.0 billion and is scheduled to mature in August 2025 bearing interest at a rate equal to LIBOR
Brookfield Property REIT Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)
plus 2.50%. During the quarter ended June 30, 2020 the Company made a principal payment in the total amount of $9.9 million. The total outstanding balance of the Term B loan as of June 30, 2020 is $1,960.0 million. The Term A-1, A-2, and B Loans are contractually obligated to be prepaid through net proceeds from property level refinances and asset sales as outlined in the Credit Agreement.
The Credit Agreement contains certain restrictive covenants which limit material changes in the nature of our business conducted, including, but not limited to, mergers, dissolutions or liquidations, dispositions of assets, liens, incurrence of additional indebtedness, dividends, transactions with affiliates, prepayment of subordinated debt, negative pledges and changes in fiscal periods. In addition, we are required to maintain compliance with certain financial covenants related to a maximum net debt-to-value ratio and a minimum fixed-charge-coverage ratio, as defined in the Credit Agreement.
On July 29, 2020, the Company entered into the First Amendment of its Credit Agreement in order to give effect to certain amendments, including, but not limited to the following:
•The lenders have agreed to certain covenant relief in respect of the financial covenants through the fiscal quarter ending June 30, 2021 (the “Covenant Relief Period”). The maximum total indebtedness to value ratio financial maintenance covenant is being eliminated permanently. The minimum fixed charge coverage ratio is being reduced to 1.20x during the Covenant Relief Period and increasing to 1.35x thereafter.
•The applicable margin for the Term A Loans and the Facility will be LIBOR plus 3.00% during the Covenant Relief Period – and thereafter, will be LIBOR plus 3.00% if the total net indebtedness to value ratio is greater than 70%.
•The Company is agreeing to maintain an ongoing liquidity covenant (set at $500 million) which will be tested as of the last day of each month against the amount of unrestricted cash, undrawn available amounts under the Facility and undrawn amounts under the new Brookfield Liquidity Facility. The Company will enter into and maintain a $500 million Brookfield Liquidity Facility (the “Brookfield Liquidity Facility”) and prior to the date the Company demonstrates compliance with the financial covenants in effect under the Credit Agreement prior to the First Amendment, any interest and principal payments thereunder must be paid-in-kind.
•The Company will be required to "match-fund" drawings under the Facility in excess of $1.0 billion using proceeds of either the Brookfield Liquidity Facility or issuances of qualified equity interests. The match-funding requirement will be required to be made (i) monthly, whereby any drawing during that month is in excess of the prior highest balance of the revolver (in excess of $1.0 billion), (ii) within 10 business days of a request from the agent if as of any day during a month, the excess draw amount would exceed $10 million and (iii) at any time of request for a revolving loan that the excess would be $100 million or greater (which would be match-funded substantially concurrently with the requested revolving loan draw).
•The Company will also be required to make additional prepayments of the Term A loans with proceeds of certain equity, debt issuances and asset sales.
•As part of the First Amendment, the Company is agreeing to a number of additional restrictions, including restrictions on incurring additional indebtedness, making of certain restricted payments and the use of proceeds under the revolving facility, which will apply either through the end of the Covenant Relief Period – and in the case of certain provisions, until the Company demonstrates compliance with the financial covenants in effect under the Credit Agreement prior to the First Amendment.
As of June 30, 2020, we are not aware of any instances of non-compliance with such covenants. Though there is potential for a risk of default (See Note 17 for discussion specific to COVID-19), in the event the Company fails to maintain compliance with its financial covenants, the Credit Agreement provides for a cure period, during which the Company has the opportunity to raise additional cash and reduce net debt balance, such as through capital contributions from BPY, or disposition of assets. Management has determined that in the event of a default, it is probable that these market-based alternatives would be available, and that these actions would provide the necessary cash flows to prevent or cure an event of default, although there is no guarantee that these market-based alternatives would be available.
Junior Subordinated Notes
GGP Capital Trust I, a Delaware statutory trust (the "Trust"), completed a private placement of $200.0 million of trust preferred securities ("TRUPS") in 2006. The Trust also issued $6.2 million of common securities to BPROP. The Trust used the proceeds
Brookfield Property REIT Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)
from the sale of the TRUPS and common securities to purchase $206.2 million of floating rate junior subordinated notes of BPROP due 2036. Distributions on the TRUPS are equal to LIBOR plus 1.45%. Distributions are cumulative and accrue from the date of original issuance. The TRUPS mature on April 30, 2036, but may be redeemed beginning on April 30, 2011 if the Trust exercises its right to redeem a like amount of junior subordinated notes. The junior subordinated notes bear interest at LIBOR plus 1.45% and are fully recourse to the Company. We have recorded the junior subordinated notes as a liability and our common equity interest in the Trust as prepaid expenses and other assets in our Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019.
Letters of Credit and Surety Bonds
We had outstanding letters of credit and surety bonds of $53.8 million as of June 30, 2020 and $50.0 million as of December 31, 2019. These letters of credit and bonds were issued primarily in connection with insurance requirements, special real estate assessments and construction obligations.
We are not aware of any instances of material non-compliance with our financial covenants related to our mortgages, notes and loans payable as of June 30, 2020.
NOTE 7 LEASES
Lessee arrangements
We are the lessee in several ground lease agreements for the land under some of our owned buildings. Generally, we own the land underlying the properties; however, at certain properties, all or part of the underlying land is owned by a third party that leases the land to us through a long-term ground lease. In addition, we lease office space for our corporate headquarters and field offices. Our material consolidated leases have reasonably certain lease terms ranging from four years to forty years. Certain leases provide the lessee with two to three renewal options which are considered to be termination options unless it is reasonably certain that the Company will elect to renew and generally range from five years to ten years each, with renewal rent payments based on a predetermined annual increase, market rates at the time of exercise of the renewal, or changes in the Consumer Price Index ("CPI").
As of June 30, 2020, the balance of ROU assets was $397.3 million, net and lease liabilities of $76.7 million for seven ground leases and one office lease in the Consolidated Balance Sheets under Topic 842, included in prepaid expenses and other assets and accounts payable and accrued expenses, respectively.
The maturity of our operating lease liabilities as of June 30, 2020 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
|
|
Amount
|
|
|
|
|
|
|
Remainder of 2020
|
|
$
|
4,623
|
|
|
|
|
|
|
|
2021
|
|
9,470
|
|
|
|
|
|
|
|
2022
|
|
9,704
|
|
|
|
|
|
|
|
2023
|
|
9,968
|
|
|
|
|
|
|
|
2024
|
|
10,200
|
|
|
|
|
|
|
|
2025
|
|
10,439
|
|
|
|
|
|
|
|
2026 and thereafter
|
|
155,012
|
|
|
|
|
|
|
|
Total undiscounted lease payments
|
|
209,416
|
|
|
|
|
|
|
|
Less: Present value adjustment
|
|
(132,682)
|
|
|
|
|
|
|
|
Total lease liability
|
|
$
|
76,734
|
|
|
|
|
|
|
Brookfield Property REIT Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)
Straight-line rent expense recognized for our consolidated operating leases is as follows:
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Three Months Ended June 30, 2020
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Three Months Ended June 30, 2019
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Six Months Ended June 30, 2020
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|
Six Months Ended June 30, 2019
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|
Ground leases
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1,772
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|
|
720
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|
4,171
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|
1,378
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|
Office leases
|
1,964
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|
|
1,771
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|
|
3,928
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|
|
3,728
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|
Straight-line rent expense is included in other property operating costs for ground leases and property management and other costs for the office lease, respectively, in the Consolidated Statements of Operations and Comprehensive Income (Loss). Several lease agreements include variable lease payments which vary based on factors such as sublease income received, the revenues or net operating income of the properties constructed on the leased premises, increases in CPI, and changes in market rents. In addition, our leases require us to reimburse the lessor for the lessor’s tax, insurance and common area costs. Variable lease payments and short-term lease costs recognized as rent expense for operating leases were not significant for the three and six months ended June 30, 2020 and 2019, respectively and are included in other property operating costs in the Consolidated Statements of Operations and Comprehensive Income (Loss).
The following summarizes additional information related to our operating leases as of June 30, 2020 and June 30, 2019:
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June 30, 2020
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June 30, 2019
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Weighted-average remaining lease term (years)
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23.2
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17.3
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Weighted-average discount rate
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7.68%
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7.36%
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Supplemental disclosure for the consolidated statements of cash flows:
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Cash paid for amounts included in the measurement of lease liabilities
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$4,639
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$4,379
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Lessor arrangements
We own a property portfolio comprised primarily of Class A retail properties and lease this retail space to tenants. As of June 30, 2020, we own a controlling interest in and consolidated 63 retail properties located throughout the United States comprising approximately 56 million square feet of GLA. We enter into operating leases with a variety of tenants, the majority of which are national and regional retail chains and local retailers. These operating leases expire starting in year 2020 and typically include renewal options, which are generally exercisable only by the tenant. Certain leases also include early termination options which are typically exercisable only by the tenant. Our leases do not allow the tenant to purchase the retail space.
The maturity analysis of the lease payments we expect to receive from our operating leases as of June 30, 2020 is as follows:
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Year
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Amount
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Remainder of 2020
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$
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555,982
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|
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2021
|
1,046,041
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2022
|
943,724
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|
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2023
|
821,732
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2024
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688,030
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2025
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559,276
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Subsequent
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1,782,036
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$
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6,396,821
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All lease-related income is reported as a single line item, rental revenues, in our Consolidated Statements of Operations and Comprehensive Income (Loss). Effective January 1, 2019, with the adoption of Topic 842, rental revenues is presented net of
Brookfield Property REIT Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)
provision for doubtful accounts. Rental income recognized on a straight-line basis consists primarily of fixed and in-substance fixed lease payments (including lease payments related to non-lease components which have been combined with the lease component). Variable rental income represents variable lease payments, which consist primarily of overage rents; reimbursements for tenants’ pro rata share of real estate taxes, insurance, property operating and marketing expenses, and utilities; lease payments related to CPI-based escalations and market rent resets; and lease termination income.
In accordance with the terms of our operating leases, we bill our tenants separately for minimum rents, tenant recoveries and overage rents, lease termination income as shown below for the three and six months ended June 30, 2020 and 2019:
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Three Months Ended June 30, 2020
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Three Months Ended June 30, 2019
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Six Months Ended June 30, 2020
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Six Months Ended June 30, 2019
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Minimum rents, billed
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$
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249,376
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$
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218,974
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$
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502,886
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$
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440,936
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Tenant recoveries, billed
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97,851
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88,166
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196,896
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180,093
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Lease termination income, billed
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1,512
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|
|
950
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2,367
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|
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2,445
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Overage rent, billed
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100
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1,944
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5,493
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6,295
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Total contractual operating lease billings
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348,839
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310,034
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707,642
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629,769
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Adjustment to recognize contractual operating lease billings on a straight-line basis
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(291)
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751
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4,186
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3,949
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Above and below-market tenant leases, net
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7,279
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4,493
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802
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7,287
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Less provision for doubtful accounts
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(14,754)
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(1,039)
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(19,728)
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(3,746)
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Total rental revenues, net
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$
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341,073
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$
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314,239
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$
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692,902
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$
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637,259
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Of the total contractual rental revenues we have billed, 82.5% and 81.0% are fixed lease payments for the three and six months ended June 30, 2020, and 79.4% and 79.3% are fixed lease payments for the three and six months ended June 30, 2019, respectively.
NOTE 8 INCOME TAXES
The Company elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended. We intend to maintain REIT status. To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement to distribute at least 90% of our taxable ordinary income. In addition, the Company is required to meet certain asset and income tests.
As a REIT, we will generally not be subject to corporate level Federal income tax on taxable income we distribute currently to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to Federal income taxes at regular corporate rates and may not be able to qualify as a REIT for four subsequent taxable years. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income or property, and to Federal income and excise taxes on our undistributed taxable income and capital gains. We are currently statutorily open to audit by the Internal Revenue Service for the years ended December 31, 2016 through 2019 and are generally statutorily open to audit by state taxing authorities for the years ended December 31, 2015 through 2019.
We have no unrecognized tax benefits recorded pursuant to uncertain tax positions as of June 30, 2020.
NOTE 9 EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS
Allocation to Noncontrolling Interests
Noncontrolling interests consists of the redeemable interests related to BPROP Common, Preferred, and LTIP Units and the noncontrolling interest in our consolidated joint ventures. The following table reflects the activity included in the allocation to noncontrolling interests.
Brookfield Property REIT Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)
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Three Months Ended June 30,
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Six Months Ended June 30,
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2020
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2019
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2020
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2019
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Distributions to preferred BPROP units ("Preferred Units")
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$
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(906)
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$
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(1,423)
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$
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(1,816)
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$
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(3,036)
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Net loss allocated to noncontrolling interest in consolidated real estate affiliates
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|
335
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9,616
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9,365
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9,920
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Net loss allocated to noncontrolling interest of the Operating Partnership (1)
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23,126
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29,692
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33,628
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24,368
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Allocation to noncontrolling interests
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22,555
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37,885
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41,177
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31,252
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Other comprehensive loss allocated to noncontrolling interests
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|
1,626
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|
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—
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|
1,626
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—
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Comprehensive loss allocated to noncontrolling interests
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|
$
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24,181
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|
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$
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37,885
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$
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42,803
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|
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$
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31,252
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_______________________________________________________________________________
(1) Represents the noncontrolling interest of our institutional investor.
Noncontrolling Interests
The noncontrolling interest related to the Common, Preferred, and LTIP Units of BPROP are presented either as redeemable noncontrolling interests in mezzanine equity or as noncontrolling interests in our permanent equity on our Consolidated Balance Sheets. Classification as redeemable or permanent equity is considered on a tranche-by-tranche basis and is dependent on whether we could be required, under certain events outside of our control, to redeem the securities for cash by the holders of the securities. Those tranches for which we could be required to redeem the security for cash are included in redeemable equity. If we control the decision to redeem the securities for cash, the securities are classified as permanent equity.
The redeemable Common and Preferred Units of BPROP are recorded at the greater of the carrying amount adjusted for the noncontrolling interest’s share of the allocation of income or loss (and its share of other comprehensive income or loss) and dividends or their redemption value (i.e. fair value) as of each measurement date. The excess of the fair value over the carrying amount from period to period is recorded within additional paid-in capital in our Consolidated Balance Sheets. Allocation to noncontrolling interests is presented as an adjustment to net income (loss) to arrive at net income (loss) attributable to BPYU. The preferred redeemable noncontrolling interests have been recorded at carrying value.
Holders of Series B Preferred Units, Series D Preferred Units, Series E Preferred Units and Series G Preferred Units of BPROP are each entitled to periodic distributions at the rates set forth in the Sixth Amended and Restated Agreement of Limited Partnership of BPROP. Generally, each Series K Preferred Unit of BPROP entitles its holder to distributions and a liquidation preference identical to those established for each share of BPYU's Class A Stock. The holders of Series L Preferred Units of BPROP are generally entitled to a pro rata distribution of an aggregate cash amount equal to the sum of (i) the aggregate cash dividends declared on all outstanding shares of BPYU's Class B Stock and (ii) the aggregate cash dividends declared on all outstanding shares of BPYU's Series B Preferred Stock. Holders of Common Units of BPROP are entitled to distributions of all or a portion of BPROP’s remaining net operating cash flow, when and as declared by BPROP’s general partner. However, the Sixth Amended and Restated Agreement of Limited Partnership of BPROP permits distributions solely to BPYU if such distributions were required to allow the Company to comply with the REIT distribution requirements or to avoid the imposition of excise tax.
Noncontrolling Interests - Permanent
As of June 30, 2020, there were 9,717.658 Series B Preferred Units of BPROP outstanding. The Series B Preferred Units have a carrying value of $50 per unit.
Also, as of June 30, 2020, there were 838,572.285 Common Units of BPROP outstanding and 341,149.099 Series K Preferred Units of BPROP (held by former common unit holders). These Series K Units were established at $21 per unit and are not subject to adjustment based on fair value. During the quarter ended March 31, 2020, BPYU entered into an agreement with a Limited Partner to redeem 3,318,399.56 Common Units at a purchase price per unit of $0.32440587 for an aggregate cost of approximately $1.1 million. Furthermore, there were 1,349,995.76 Series K Preferred Units of BPROP redeemed at a price per unit of $19.635 for an aggregate cost of approximately $26.5 million.
Brookfield Property REIT Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)
Noncontrolling Interests - Redeemable
The Series D Preferred Units of BPROP are convertible based on a conversion ratio of 1.50821, which is the quotient of the Series D Preferred Unit’s $50 liquidation preference and $33.151875 conversion price. Upon conversion, each Series D Preferred Unit entitles its holder to (i) $21.9097 in cash, (ii) a number of Series K Preferred Units of BPROP equal to (x) 0.40682134 Series K Preferred Units (which is subject to adjustment), multiplied by (y) the Series D conversion ratio; and (iii) a number of Common Units of BPROP equal to (x) one Common Unit (which is subject to adjustment), multiplied by (y) the Series D conversion ratio. As of June 30, 2020, there were 532,749.6574 Series D Preferred Units of BPROP outstanding.
The Series E Preferred Units of BPROP are convertible based on a conversion ratio of 1.29836, which is the quotient of the Series E Preferred Unit’s $50 liquidation preference and $38.51 conversion price. Upon conversion, each Series E Preferred Unit entitles its holder to (i) $18.8613 in cash, (ii) a number of Series K Preferred Units of BPROP equal to (x) 0.40682134 Series K Preferred Units (which is subject to adjustment), multiplied by (y) the Series E conversion ratio; and (iii) a number of Common Units of BPROP equal to (x) one Common Unit (which is subject to adjustment), multiplied by (y) the Series E conversion ratio. As of June 30, 2020, there were 502,657.8128 Series E Preferred Units of BPROP outstanding.
The holder of each Series K Preferred Unit of BPROP issued upon conversion of Series D Preferred Units or Series E Preferred Units of BPROP has the right to redeem such Series K Preferred Unit for a cash amount equal to the average closing price of BPYU’s Class A Stock for the five consecutive trading days ending on the date of the notice of redemption, provided that BPYU may elect to satisfy such redemption by delivering one share of BPYU’s Class A Stock. The holder of each Common Unit of BPROP issued upon conversion of Series D Preferred Units or Series E Preferred Units of BPROP has the right to redeem such Common Unit for a cash amount equal to $0.324405869, subject to adjustment.
Each LTIP Unit of BPROP is convertible into, and, except for the level of preference, entitles its holder to regular and liquidating distributions equivalent to that of 0.016256057 Series K Preferred Units, subject to adjustment. Each Series K Preferred Unit received by an LTIP holder in connection with the BPY Transaction is redeemable for a cash amount equal to the average closing price of BPYU's Class A Stock for five consecutive trading days ending on the date of the notice of redemption, provided that BPYU may elect to satisfy such redemption by delivering one share of BPYU's Class A Stock. If the holders had requested redemption of the Class A Stock and Preferred Units as of June 30, 2020, the aggregate amount of cash the Company would have paid would have been $550.7 million and $54.9 million, respectively.
The following table reflects the activity of the common redeemable noncontrolling interests for the three and six months ended June 30, 2020 and 2019.
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Balance at January 1, 2019
|
$
|
73,696
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|
|
Net income
|
3,358
|
|
|
Series K Preferred Unit redemption
|
(14,935)
|
|
|
Balance at March 31, 2019
|
62,119
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|
|
Net income
|
103
|
|
|
|
|
|
|
|
|
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|
|
Balance at June 30, 2019
|
62,222
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|
|
|
|
|
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|
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|
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|
|
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|
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|
|
|
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|
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|
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|
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|
|
Balance at January 1, 2020
|
$
|
62,235
|
|
|
Net loss
|
(441)
|
|
|
Series K Preferred Unit redemption
|
(388)
|
|
|
Balance at March 31, 2020
|
61,406
|
|
|
Net income
|
441
|
|
|
Series K Preferred Unit redemption
|
(10)
|
|
|
Balance at June 30, 2020
|
61,837
|
|
|
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|
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|
Brookfield Property REIT Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)
Redeemable Class A Stock
Class A Stock refers to the Company's Class A Stock, par value $0.01 per share, authorized and issued to GGP common stockholders that were unaffiliated with BPY as part of the BPY Transaction. The Company's Class A Stock is listed on the Nasdaq Global Select Market ("Nasdaq"). Our Class A Stock has traded on Nasdaq under the symbol "BPYU" since March 2, 2020, prior to which it traded under the symbol "BPR".
Each share of Class A Stock is entitled to cumulative dividends per share in a cash amount equal in value to the amount of any distribution made on a BPY limited partnership unit ("BPY unit"). In addition, each share of Class A Stock is exchangeable for one BPY unit or its cash equivalent (the form of payment to be determined by BPY or an affiliate, in its sole discretion). Such exchange and distribution rights are subject to adjustment in the event of certain dilutive or other capital events by BPY or BPYU. If and to the extent declared by the Company's board of directors, the record and payment dates for the dividends or other distributions upon the shares of Class A Stock, to the extent not prohibited by applicable law, is expected to be the same as the record and payment dates for the dividends or other distributions upon the BPY units. Pursuant to the terms of the Company's charter, all such dividends to holders of Class A Stock will be paid prior and in preference to any dividends or distributions on the Class B Stock, Series B Preferred Stock or Class C Stock will be fully declared and paid before any dividends are declared and paid or any other distributions are made on any Class B Stock, Series B Preferred Stock or Class C Stock. The holders of Class A Stock shall not be entitled to any dividends from BPYU other than the Class A dividend.
Upon any liquidation, dissolution or winding up of the Company that is not a Market Capitalization Liquidation Event (as defined below) or substantially concurrent with the liquidation, dissolution or winding up of BPY, the holders of Class A Stock are entitled to a cash amount, for each share of Class A Stock, equal to the market price of one BPY unit (subject to adjustment in the event of certain dilutive or other capital events by BPY or BPYU) on the date immediately preceding announcement of such liquidation, dissolution or winding up, plus all declared and unpaid dividends. If, upon any such liquidation, dissolution or winding up, the assets of BPYU are insufficient to make such payment in full, then the assets of BPYU will be distributed among the holders of Class A Stock ratably in proportion to the full amounts to which they would otherwise be respectively entitled to receive.
If the market capitalization of the Class A Stock (i.e., if the price per share of Class A Stock, multiplied by the number of shares of Class A Stock outstanding) averages, over any period of 30 consecutive trading days, less than one (1) billion dollars, the BPYU board will have the right to liquidate BPYU’s assets and wind up BPYU’s operations (a "Market Capitalization Liquidation Event"). Upon any Market Capitalization Liquidation Event, the holders of Class A Stock shall be entitled to a cash amount, for each share of Class A Stock, equal to the dollar volume-weighted average price of one BPY unit over the ten (10) trading days immediately following the public announcement of such Market Capitalization Liquidation Event, plus all declared and unpaid dividends. If, upon any such Market Capitalization Liquidation Event, the assets of BPYU are insufficient to make such payment in full, then the assets of BPYU will be distributed among the holders of Class A Stock ratably in proportion to the full amounts which they would otherwise be respectively entitled to receive. Notwithstanding the foregoing, upon any Market Capitalization Liquidation Event, BPY may elect to exchange all of the outstanding shares of the Class A Stock for BPY units on a one-for-one basis, subject to adjustment in the event of certain dilutive or other capital events by BPY or BPYU.
Holders of Class A Stock shall have the right to exchange all or a portion of their Class A Stock for cash at a price equal to the value of an equivalent number of BPY units, subject to adjustment in the event of certain dilutive or other capital events by BPY or BPYU. Upon receipt of a request for exchange, BPYU will deliver a notice of exchange to BPY within one (1) business day and will have ten (10) business days to deliver the cash amount to the tendering holder. Upon receipt of the notice of exchange, BPY or an affiliate may elect to satisfy BPYU’s exchange obligation by exchanging all of the shares of the Class A Stock tendered for BPY units on a one-for-one basis. This initial one-for-one conversion factor is subject to adjustment in the event of certain dilutive or other capital events by BPY or BPYU. If so elected, BPY will have to satisfy such obligation within ten (10) business days from the date of the notice of exchange. If BPY exercises its right to assume the exchange obligation, units of BPY units will be delivered in exchange for the Class A Stock and such Class A Stock will automatically be converted into Class B Stock.
As there are certain events outside of the Company’s control whereby it could be required to redeem the Class A Stock for cash by the holders of the securities, the Class A Stock is included in redeemable equity. Accordingly, the Class A Stock are
Brookfield Property REIT Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)
recorded at the greater of the carrying amount or their redemption value (i.e. fair value) as of each measurement date. The excess of the fair value over the carrying amount from period to period is recorded within additional paid-in capital in the Company’s Consolidated Balance Sheets. There is no adjustment within additional paid-in capital for the Class A stock when the fair value is less than the carrying value.
Class B Stock
The Company’s shareholders approved the amendment and restatement of the Company’s charter at its annual stockholder meeting on June 19, 2019 (the "Restated Charter"), which became effective on June 26, 2019 and, among other things, authorized the Company’s issuance of up to 965,000,000 shares of a new class of stock called Class B-2 Stock, par value of $0.01 per share. Each share of Class B-2 Stock shall have terms (including the same powers, preferences and relative, participating, optional and other special rights, and qualifications, limitations and restrictions) identical to the terms of a share of Class B-1 Stock other than voting rights. The following description sets forth certain general terms and provisions of the Company's Class B-1 Stock and Class B-2 Stock (together the "Class B Stock").
Pursuant to the Restated Charter and subject to the prior rights of holders of all classes, including the Class A Stock, and any series of preferred stock at the time outstanding having prior rights as to dividends, each share of Class B Stock entitles its holder to cumulative dividends per share in a cash amount at a rate of 6.5% per year of the Class B liquidation amount per share (which rate was 10.0% per year until the effective date of the Restated Charter on June 26, 2019) equal to $21.39 per share. On October 18, 2018, each holder of the Class B-1 Stock hereby irrevocably waived, all of its right, title and interest in and to 2.5% of the dividend rate, including without elimination all rights and entitlement to payment of such amounts. This partial dividend waiver resulted in a 7.5% effective rate per year of the Class B Liquidation Amount per share and was terminated upon the effectiveness of the Restated Charter. Dividends on the Class B Stock may also be paid by an in-kind distribution of additional shares of Class B Stock or any other class of shares of capital stock of BPYU ranking junior to the Class A Stock. Dividends on the Class B Stock shall be cumulative and shall be payable quarterly in arrears, when, as and if declared by the Company's Board of Directors with respect to dividends on the Class B Stock.
Holders of the Class B Stock are not entitled to receive dividends, redemptions or other distributions: (i) unless and until (a) BPYU has paid the aggregate dividends owed to the holders of Class A Stock and (b) the dividend coverage ratio (as defined below) is equal to or greater than 1.25:1, (ii) if any tendering holder of Class A Stock has not received the cash or BPY units due upon exchange or (iii) if holders of Class A Stock are owed cash in the event of an adjustment to the conversion factor. The dividend coverage ratio is referred to as a ratio of (i) BPYU’s funds from operations, as calculated in accordance with the definition of funds from operations used by the National Association of Real Estate Investment Trusts ("Nareit"), for the immediately preceding fiscal quarter, to (ii) the product of (a) the amount of the most recent regular quarterly distribution declared by BPY on each BPY unit, times (b) the number of shares of Class A Stock outstanding at such time.
Series B Preferred Stock
The following description sets forth certain general terms and provisions of the Series B Preferred Stock, par value $0.01 per share, of the Company (the "Series B Preferred Stock").
Pursuant to the Restated Charter and subject to the prior rights of holders of all classes, including the Class A Stock, Class B Stock and any series of preferred stock at the time outstanding having prior rights as to dividends, each share of Series B Preferred Stock will entitle its holder to cumulative dividends per share in a cash amount at a rate of 8.65% per year of the Class B liquidation amount per share (which rate was 10.0% until the effective date of the Restated Charter on June 26, 2019), with such Class B liquidation amount per share equal to $21.39. Dividends on the Series B Preferred Stock may also be paid by an in-kind distribution of additional shares of Series B Preferred Stock or any other class of shares of capital stock of BPYU ranking junior to the Class A Stock and Class B Stock. Dividends on the Series B Preferred Stock shall be cumulative and shall be payable quarterly in arrears, when, as and if declared by the Company's Board of Directors with respect to dividends on the Series B Preferred Stock.
Holders of the Series B Preferred Stock are not entitled to receive dividends, redemptions or other distributions: (i) unless and until (a) BPYU has paid the aggregate dividends owed to the holders of Class A Stock and Class B Stock and (b) the dividend coverage ratio (as defined below) is equal to or greater than 1.25:1, (ii) if any tendering holder of Class A Stock has not received the cash or BPY units due upon exchange or (iii) if holders of Class A Stock are owed cash in the event of an adjustment to the conversion factor. The dividend coverage ratio is referred to as a ratio of (i) BPYU’s funds from operations,
Brookfield Property REIT Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)
as calculated in accordance with the definition of funds from operations used by Nareit, for the immediately preceding fiscal quarter, to (ii) the product of (a) the amount of the most recent regular quarterly distribution declared by BPY on each BPY unit, times (b) the number of shares of Class A Stock outstanding at such time.
Class C Stock
Class C Stock refers to the Company's Class C Stock, par value $0.01 per share, authorized as part of the BPY Transaction. Pursuant to the amended charter and subject to the prior rights of holders of all classes, including the holders of Class A Stock, Class B Stock, Series B Preferred Stock and any series of preferred stock at the time outstanding having prior rights as to dividends, each share of Class C Stock will entitle its holder to dividends when, as and if declared by the Company's Board of Directors out of any assets of BPYU legally available therefore. The record and payment date for dividends on shares of Class C Stock shall be such date that the Company's Board of Directors shall designate.
Notwithstanding the foregoing, holders of the Class C Stock are not entitled to receive dividends, redemptions or other distributions: (i) unless and until (a) BPYU has paid the aggregate dividends owed to the holders of Class A Stock and (b) the dividend coverage ratio is equal to or greater than 1.25:1, (ii) if any tendering holder of Class A Stock has not received the cash or BPY units due upon exchange, (iii) if holders of Class A Stock are owed cash in the event of an adjustment to the conversion factor or (iv) unless and until the full cumulative dividends on the Class B Stock and Series B Preferred Stock for all past dividend periods and any current dividend periods have been (or contemporaneously are) (a) declared or paid in cash or (b) declared and a sum sufficient for the payment thereof in cash is set apart for such payment.
Voting Rights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Class
|
Authorized
|
Issued
|
Shares Outstanding
|
Votes per Share
|
|
Class A Stock
|
4,517,500,000
|
|
56,712,708
|
|
55,294,707
|
|
1:1
|
|
Class B-1 Stock
|
4,517,500,000
|
|
175,511,710
|
|
175,511,710
|
|
1:1
|
|
Class B-2 Stock
|
965,000,000
|
|
121,203,654
|
|
121,203,654
|
|
0:1
|
|
Series B Preferred Stock
|
425,000,000
|
|
202,438,184
|
|
202,438,184
|
|
1:1
|
|
Class C Stock
|
1,000,000,000
|
|
640,051,301
|
|
640,051,301
|
|
1:1
|
All share counts in table above are as of June 30, 2020.
Class A Stock Dividend
Our Board of Directors declared Class A Stock dividends during 2020 and 2019 as follows:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Declaration Date
|
|
Record Date
|
|
Payment Date
|
|
Dividend Per Share
|
|
2020
|
|
|
|
|
|
|
|
August 5
|
|
August 31
|
|
September 30
|
|
$
|
0.3325
|
|
|
May 7
|
|
May 29
|
|
June 30
|
|
0.3325
|
|
|
February 5
|
|
February 28
|
|
March 31
|
|
0.3325
|
|
|
2019
|
|
|
|
|
|
|
|
November 4
|
|
November 29
|
|
December 31
|
|
$
|
0.3300
|
|
|
August 1
|
|
August 30
|
|
September 30
|
|
0.3300
|
|
|
May 6
|
|
May 31
|
|
June 28
|
|
0.3300
|
|
|
February 6
|
|
February 28
|
|
March 29
|
|
0.3300
|
|
Brookfield Property REIT Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)
Class A Stock Repurchases and Conversions
On August 1, 2019, the Company’s Board of Directors authorized the repurchase of the greater of (i) 5% of the Company’s Class A Stock that are issued or outstanding or (ii) 10% of its public float of Class A Stock over the next 12 months from time to time as market conditions warrant.
On March 29, 2019, BPYU purchased for cancellation 4,679,802 shares of Class A Stock at a purchase price of $20.30 per share, for an aggregate cost of approximately $95 million, excluding fees and expenses.
In the second quarter of 2019, BPYU purchased 200,000 shares of Class A Stock at an average purchase price of $18.37 per share for an aggregate cost of approximately $3.68 million, which were subsequently canceled in July 2019.
Furthermore, there were 647,250 shares of Class A Stock that were purchased in relation to 2019 restricted stock grants. These shares were purchased at an average purchase price of $19.40 per share for an aggregate cost of approximately $12.59 million.
In the first quarter of 2020, BPYU purchased 855,000 shares of Class A Stock in relation to the 2020 restricted stock grant. These shares were purchased at an average price of $18.57 per share for an aggregate cost of approximately $15.87 million.
During the six months ended June 30, 2020, there were 7,957,603 shares of Class A Stock converted to 5,488,251 shares of Class B-1 Stock, at a weighted average price of $14.75 and $21.39, respectively.
Class B Stock and Series B Preferred Stock Dividends
Our Board of Directors did not declare dividends on Class B-1 Stock, Class B-2 Stock, or Series B Preferred Stock during the six months ended June 30, 2020. Our Board of Directors declared dividends on these classes of stock during 2019 as follows:
Class B-1 Stock Dividends
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Declaration Date
|
|
Record Date
|
|
Payment Date
|
|
Average Dividend Per Share
|
|
2019
|
|
|
|
|
|
|
|
November 4
|
|
December 25
|
|
December 25
|
|
$
|
0.110
|
|
On November 4, 2019, a partial dividend was declared in the amount of $0.11 per share of the Class B-1 Stock.
Class B-2 Stock Dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Declaration Date
|
|
Record Date
|
|
Payment Date
|
|
Average Dividend Per Share
|
|
2019
|
|
|
|
|
|
|
|
November 4
|
|
December 25
|
|
December 25
|
|
$
|
0.110
|
|
On November 4, 2019, a partial dividend was declared in the amount of $0.11 per share of the Class B-2 Stock.
Combined Class B stock and Series B Preferred Stock (Prior to Restated Charter)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Declaration Date
|
|
Record Date
|
|
Payment Date
|
|
Average Dividend Per Share
|
|
2019
|
|
|
|
|
|
|
|
May 25
|
|
June 25
|
|
June 25
|
|
$
|
0.397
|
|
|
March 25
|
|
March 27
|
|
March 27
|
|
1.015
|
|
Brookfield Property REIT Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)
A dividend was declared on the Class B-1 Stock and the Series B Preferred Stock of the Company in the amount equal to all unpaid dividends on such shares from the date of issue to March 31, 2019 at the rate of 7.5% per annum payable on March 27, 2019 to the holders of record of Class B-1 Stock and the Series B Preferred Stock on March 27, 2019 for a combined distribution total of approximately $467.3 million.
In the second quarter of 2019, a dividend was declared on the Class B-1 Stock and the Series B Preferred Stock of the Company in the amount equal to all unpaid dividends on such shares from March 31, 2019 to June 25, 2019 at the rate of 7.5% per annum payable on June 25, 2019 to the holders of record of Class B-1 Stock and the Series B Preferred Stock on June 25, 2019 for a combined distribution total of approximately $183.8 million.
Class B-1 Stock Issuance & Repurchase
In the first quarter of 2019, BPYU repurchased 10,496,703 shares of Class B-1 Stock held by BPR FIN 1 Subco LLC, a related party, for fair market value consideration of $224.5 million, being the redemption amount of the shares acquired at $21.39 per share.
In the fourth quarter of 2019, BPYU issued 13,712,834 shares of Class B-1 Stock to BPR FIN 1 Subco LLC, a related party, due to a contribution of $293.3 million, equal to $21.39 per share.
Class B-2 Stock Exchange
On June 26, 2019, following the effectiveness of the Restated Charter, certain subsidiaries of BPR FIN 1 Subco LLC, a related party, exchanged an aggregate of 121,203,654 shares of Class B-1 Stock held by such subsidiaries for 121,203,654 shares of Class B-2 Stock.
Preferred Stock
On February 13, 2013, we issued, in a public offering, 10,000,000 shares of 6.375% Series A Cumulative Perpetual Preferred Stock (the "Pre-Merger Preferred Stock") at a price of $25.00 per share, resulting in net proceeds of $242.0 million after issuance costs. In connection with the BPY Transaction, each share of Pre-Merger Preferred Stock was converted into one share of 6.375% Series A cumulative redeemable preferred stock of BPYU (the "Series A Preferred Stock"). The Company's Series A Preferred Stock is listed on Nasdaq. Our Series A Preferred Stock has traded on Nasdaq under the symbol "BPYUP" since March 2, 2020, prior to which it traded under the symbol "BPRAP". The Series A Preferred Stock is recorded net of issuance costs within equity on our Consolidated Balance Sheets, and accrues a quarterly dividend at an annual rate of 6.375%. The dividend is paid in arrears in preference to dividends on our Class A Stock, and reduces net income available to stockholders, and therefore, earnings per share.
The Series A Preferred Stock does not have a stated maturity date but we may redeem the Series A Preferred Stock for $25.00 per share plus all accrued and unpaid dividends. Upon certain circumstances surrounding a change of control, holders of Series A Preferred Stock may elect to convert each share of their Series A Preferred Stock into a number of shares of Class A Stock or Class C Stock, at the option of the holder, equivalent to $25.00 plus accrued and unpaid dividends, but not to exceed a cap of 2.4679 shares of Class A Stock or Class C Stock (subject to certain adjustments related to splits, subdivisions, or combinations). The BPY Transaction did not meet the definition of a change in control per the certificate of designation governing the Series A Preferred Stock.
Brookfield Property REIT Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)
Our Board of Directors declared preferred stock dividends during 2020 and 2019 as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Declaration Date
|
|
Record Date
|
|
Payment Date
|
|
Dividend Per Share
|
|
2020
|
|
|
|
|
|
|
|
August 5
|
|
September 15, 2020
|
|
October 1, 2020
|
|
$
|
0.3984
|
|
|
May 7
|
|
June 15, 2020
|
|
July 1, 2020
|
|
0.3984
|
|
|
February 5
|
|
March 15, 2020
|
|
April 1, 2020
|
|
0.3984
|
|
|
2019
|
|
|
|
|
|
|
|
November 4
|
|
December 13, 2019
|
|
January 1, 2020
|
|
$
|
0.3984
|
|
|
August 1
|
|
September 13, 2019
|
|
October 1, 2019
|
|
0.3984
|
|
|
May 6
|
|
June 14, 2019
|
|
July 1, 2019
|
|
0.3984
|
|
|
February 6
|
|
March 15, 2019
|
|
April 1, 2019
|
|
0.3984
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other Comprehensive Loss
The following table reflects the components of accumulated other comprehensive loss as of June 30, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020
|
|
June 30, 2019
|
|
|
|
Net unrealized gains on financial instruments
|
|
$
|
45
|
|
|
$
|
83
|
|
|
|
|
Foreign currency translation
|
|
(103,386)
|
|
|
(82,057)
|
|
|
|
|
AOCI - minority interest
|
|
1,626
|
|
|
—
|
|
|
|
|
Accumulated other comprehensive loss
|
|
$
|
(101,715)
|
|
|
$
|
(81,974)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 10 EARNINGS PER SHARE
Class A Stock
Income available to Class A stockholders is limited to distributed income or dividends declared. Additionally, for purposes of allocating earnings to Class A Stock, the portion of the change in the carrying amount of Class A Stock that reflects a redemption in excess of fair value is considered a dividend to the Class A stockholders. As the Class A Stock redemption value approximates its fair value, basic and diluted earnings per share ("EPS") for Class A Stock is equivalent to the dividends declared for the period January 1, 2020 through June 30, 2020. There were 64,024,422 and 55,294,707 shares of Class A Stock outstanding as of December 31, 2019 and June 30, 2020, respectively. EPS is not presented for Class B Stock, Series B Preferred Stock or Class C Stock as these classes of stock are not publicly traded.
NOTE 11 STOCK-BASED COMPENSATION PLANS
The GGP Inc. 2010 Equity Plan (the "Equity Plan"), renamed as the Amended and Restated Brookfield Property REIT Inc. 2010 Equity Incentive Plan on August 28, 2018 in connection with the BPY Transaction, reserves for the issuance of 4% of outstanding Class A Stock on a fully diluted basis. The Equity Plan provides for grants of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, other stock-based awards and performance-based compensation (collectively, the "Awards"). The Company's directors, officers and other employees and those of its subsidiaries and affiliates are eligible for the Awards. The Equity Plan is not subject to the Employee Retirement Income Security Act of 1974, as amended. No participant may be granted more than 4,000,000 shares, or the equivalent dollar value of such shares, in any year. Options granted under the Equity Plan will be designated as either nonqualified stock options or incentive stock options. An option granted as an incentive stock option will, to the extent it fails to qualify as an incentive stock option, be treated as a nonqualified option. The exercise price of an option may not be less than the fair value of a share of BPYU's Class A Stock on the date of grant. The term of each option will be determined prior to the date of grant, but may not exceed 10 years. In addition to the Equity Plan, effective February 20, 2019, the Brookfield Property Group Restricted BPR Class A Stock Plan and Brookfield Property L.P. FV LTIP Unit Plan (the "2019 Plans") provide for grants of Restricted Class A Shares of BPR, now BPYU, stock and FV LTIP Units of Brookfield Property L.P. respectively. Officers and employees of any member of the Brookfield Properties Group and of their respective affiliates are eligible for Awards under these plans.
Brookfield Property REIT Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)
In connection with the BPY Transaction, the Equity Plan was amended and certain outstanding awards were modified. All outstanding GGP in and out of the money options were canceled and replaced with Class A Stock of BPYU and BPY options, respectively. Certain existing appreciation only LTIP awards were canceled and replaced with substitute awards of a BPY affiliate. Outstanding restricted GGP shares were replaced with restricted shares of Class A Stock. As the awards were modified in conjunction with an equity restructuring, they were accounted for as modifications. Incremental compensation cost was measured as the excess of the fair value of the replacement awards over the fair value of the original awards immediately before the terms were modified. Total compensation cost measured at the date of modification was the grant-date fair value of the original awards for which the requisite service is expected to be rendered (or has already been rendered) plus the incremental cost associated with the replacement awards. For vested awards, incremental compensation cost was recognized on the modification date. For unvested awards, incremental compensation cost is being recognized over the remaining service period.
Compensation expense related to stock-based compensation plans for the three and six months ended June 30, 2020 and 2019 is summarized in the following table in thousands:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
2020
|
|
2019
|
|
|
2020
|
|
2019
|
|
Stock options - Property management and other costs
|
$
|
—
|
|
|
$
|
29
|
|
|
|
$
|
—
|
|
|
$
|
29
|
|
|
Stock options - General and administrative
|
—
|
|
|
4
|
|
|
|
—
|
|
|
4
|
|
|
Restricted stock - Property management and other costs
|
1,473
|
|
|
1,741
|
|
|
|
2,324
|
|
|
3,125
|
|
|
Restricted stock - General and administrative
|
847
|
|
|
425
|
|
|
|
1,249
|
|
|
760
|
|
|
LTIP Units - Property management and other costs
|
8
|
|
|
82
|
|
|
|
10
|
|
|
154
|
|
|
LTIP Units - General and administrative
|
15
|
|
|
417
|
|
|
|
21
|
|
|
1,374
|
|
|
Total
|
$
|
2,343
|
|
|
$
|
2,698
|
|
|
|
$
|
3,604
|
|
|
$
|
5,446
|
|
The following tables summarize stock option, LTIP Unit and restricted stock activity for the Equity Plan and the 2019 Plans for the six months ended June 30, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
|
2019
|
|
|
|
|
Shares
|
|
Weighted Average Exercise Price
|
|
Shares
|
|
Weighted Average Exercise Price
|
|
Stock options Outstanding at January 1,
|
175,799
|
|
|
$
|
25.66
|
|
|
1,011,523
|
|
|
$
|
19.71
|
|
|
Granted
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Exercised
|
—
|
|
|
—
|
|
|
(773,642)
|
|
|
17.91
|
|
|
Forfeited
|
—
|
|
|
—
|
|
|
(13)
|
|
|
26.05
|
|
|
Expired
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Stock options Outstanding at June 30,
|
175,799
|
|
|
$
|
25.66
|
|
|
237,868
|
|
|
$
|
25.59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
|
2019
|
|
|
|
|
Shares
|
|
Weighted Average Grant Date Fair Value
|
|
Shares
|
|
Weighted Average Grant Date Fair Value
|
|
LTIP Units Outstanding at January 1,
|
2,177,668
|
|
|
$
|
24.11
|
|
|
3,921,175
|
|
|
$
|
25.96
|
|
|
Granted (1)
|
24,251
|
|
|
18.56
|
|
|
—
|
|
|
—
|
|
|
Exercised
|
(35,820)
|
|
|
26.54
|
|
|
(1,715,722)
|
|
|
28.34
|
|
|
Forfeited
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Expired
|
(271,463)
|
|
|
22.42
|
|
|
—
|
|
|
—
|
|
|
LTIP Units Outstanding at June 30,
|
1,894,636
|
|
|
$
|
24.23
|
|
|
2,205,453
|
|
|
$
|
24.11
|
|
(1) Granted by an affiliated operating partnership of the Company.
Brookfield Property REIT Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
|
2019
|
|
|
|
|
Shares
|
|
Weighted Average Grant Date Fair Value
|
|
Shares
|
|
Weighted Average Grant Date Fair Value
|
|
Restricted Stock Outstanding at January 1,
|
1,149,164
|
|
|
$
|
20.98
|
|
|
986,937
|
|
|
$
|
22.48
|
|
|
Granted
|
851,102
|
|
|
18.57
|
|
|
647,226
|
|
|
19.94
|
|
|
Vested
|
(256,329)
|
|
|
22.09
|
|
|
(385,081)
|
|
|
22.60
|
|
|
Forfeited
|
(44,827)
|
|
|
19.85
|
|
|
(14,214)
|
|
|
22.12
|
|
|
Restricted Stock Outstanding at June 30,
|
1,699,110
|
|
|
$
|
19.63
|
|
|
1,234,868
|
|
|
$
|
21.11
|
|
NOTE 12 ACCOUNTS RECEIVABLE, NET
The following table summarizes the significant components of accounts receivable, net.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020
|
|
December 31, 2019
|
|
Trade receivables
|
|
$
|
404,574
|
|
|
$
|
111,582
|
|
|
Short-term tenant receivables
|
|
6,218
|
|
|
4,198
|
|
|
Straight-line rent receivable
|
|
153,800
|
|
|
144,249
|
|
|
Other accounts receivable
|
|
3,335
|
|
|
2,725
|
|
|
Total accounts receivable
|
|
567,927
|
|
|
262,754
|
|
|
Provision for doubtful accounts
|
|
(50,718)
|
|
|
(27,826)
|
|
|
Total accounts receivable, net
|
|
$
|
517,209
|
|
|
$
|
234,928
|
|
For leases where collectability of substantially all the lease payments is probable, the Company records an allowance for doubtful accounts against the portion of accounts receivable, net, including straight-line rents, which is estimated to be uncollectible to account for portfolio-level collection issues. The Company estimates the allowance based on previous recovery experience and expectations of future lease concessions, in consideration of weighted average remaining lease terms and the period of time elapsed on such lease terms. Changes in the allowance is recognized in rental income in our Consolidated Statements of Operations and Comprehensive Income (Loss).
NOTE 13 NOTES RECEIVABLE
The following table summarizes the significant components of notes receivable.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020
|
|
December 31, 2019
|
|
Notes receivable
|
|
$
|
38,418
|
|
|
$
|
69,963
|
|
|
Accrued interest
|
|
3,623
|
|
|
6,347
|
|
|
Total notes receivable
|
|
$
|
42,041
|
|
|
$
|
76,310
|
|
On December 20, 2019 the Company issued a $31.7 million subordinated unsecured note to an institutional investor. The note was repaid in full on January 7, 2020.
Brookfield Property REIT Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)
NOTE 14 PREPAID EXPENSES AND OTHER ASSETS
The following table summarizes the significant components of prepaid expenses and other assets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020
|
|
|
|
|
|
December 31, 2019
|
|
|
|
|
|
|
Gross Asset
|
|
Accumulated
Amortization
|
|
Balance
|
|
Gross Asset
|
|
Accumulated
Amortization
|
|
Balance
|
|
Intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Above-market tenant leases, net
|
$
|
159,769
|
|
|
$
|
(70,012)
|
|
|
$
|
89,757
|
|
|
$
|
177,480
|
|
|
$
|
(79,467)
|
|
|
$
|
98,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate tax stabilization agreement, net
|
111,506
|
|
|
(60,860)
|
|
|
50,646
|
|
|
111,506
|
|
|
(57,704)
|
|
|
53,802
|
|
|
Total intangible assets
|
$
|
271,275
|
|
|
$
|
(130,872)
|
|
|
$
|
140,403
|
|
|
$
|
288,986
|
|
|
$
|
(137,171)
|
|
|
$
|
151,815
|
|
|
Remaining prepaid expenses and other assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted cash
|
|
|
|
|
79,032
|
|
|
|
|
|
|
77,683
|
|
|
Security and escrow deposits
|
|
|
|
|
1,282
|
|
|
|
|
|
|
1,259
|
|
|
Prepaid expenses
|
|
|
|
|
32,459
|
|
|
|
|
|
|
27,632
|
|
|
Other non-tenant receivables
|
|
|
|
|
68,104
|
|
|
|
|
|
|
56,948
|
|
|
Operating lease right of use assets, net
|
|
|
|
|
397,323
|
|
|
|
|
|
|
402,573
|
|
|
Finance lease right of use assets, net
|
|
|
|
|
7,925
|
|
|
|
|
|
|
7,995
|
|
|
Other
|
|
|
|
|
20,360
|
|
|
|
|
|
|
19,155
|
|
|
Total remaining prepaid expenses and other assets
|
|
|
|
|
606,485
|
|
|
|
|
|
|
593,245
|
|
|
Total prepaid expenses and other assets
|
|
|
|
|
$
|
746,888
|
|
|
|
|
|
|
$
|
745,060
|
|
Brookfield Property REIT Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)
NOTE 15 ACCOUNTS PAYABLE AND ACCRUED EXPENSES
The following table summarizes the significant components of accounts payable and accrued expenses.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020
|
|
|
|
|
|
December 31, 2019
|
|
|
|
|
|
|
Gross
Liability
|
|
Accumulated
Accretion
|
|
Balance
|
|
Gross
Liability
|
|
Accumulated
Accretion
|
|
Balance
|
|
Intangible liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Below-market tenant leases, net
|
237,157
|
|
|
(60,084)
|
|
|
$
|
177,073
|
|
|
218,608
|
|
|
(56,893)
|
|
|
$
|
161,715
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible liabilities
|
$
|
237,157
|
|
|
$
|
(60,084)
|
|
|
$
|
177,073
|
|
|
$
|
218,608
|
|
|
$
|
(56,893)
|
|
|
$
|
161,715
|
|
|
Remaining accounts payable and accrued expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued interest
|
|
|
|
|
45,244
|
|
|
|
|
|
|
42,371
|
|
|
Accounts payable and accrued expenses
|
|
|
|
|
100,524
|
|
|
|
|
|
|
71,720
|
|
|
Accrued real estate taxes
|
|
|
|
|
73,222
|
|
|
|
|
|
|
53,210
|
|
|
Deferred gains/income
|
|
|
|
|
67,566
|
|
|
|
|
|
|
85,598
|
|
|
Accrued payroll and other employee liabilities
|
|
|
|
|
56,104
|
|
|
|
|
|
|
61,002
|
|
|
Construction payable
|
|
|
|
|
262,136
|
|
|
|
|
|
|
301,096
|
|
|
Tenant and other deposits
|
|
|
|
|
15,218
|
|
|
|
|
|
|
15,078
|
|
|
Insurance reserve liability
|
|
|
|
|
12,564
|
|
|
|
|
|
|
12,787
|
|
|
Finance lease obligations
|
|
|
|
|
9,094
|
|
|
|
|
|
|
9,094
|
|
|
Conditional asset retirement obligation liability
|
|
|
|
|
2,505
|
|
|
|
|
|
|
3,275
|
|
|
Lease liability right of use
|
|
|
|
|
76,734
|
|
|
|
|
|
|
78,500
|
|
|
Other
|
|
|
|
|
108,757
|
|
|
|
|
|
|
131,684
|
|
|
Total remaining Accounts payable and accrued expenses
|
|
|
|
|
829,668
|
|
|
|
|
|
|
865,415
|
|
|
Total Accounts payable and accrued expenses
|
|
|
|
|
$
|
1,006,741
|
|
|
|
|
|
|
$
|
1,027,130
|
|
NOTE 16 LITIGATION
In the normal course of business, from time to time, we are involved in legal proceedings relating to the ownership and operations of our properties. In management's opinion, the liabilities, if any, that may ultimately result from such legal actions are not expected to have a material effect on our consolidated financial position, results of operations or liquidity.
The Company is subject to litigation related to the BPY Transaction. The Company cannot predict the outcome of pending litigation, nor can it predict the amount of time and expense that will be required to resolve such litigation.
Brookfield Property REIT Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)
NOTE 17 COMMITMENTS AND CONTINGENCIES
We lease land or buildings at certain properties from third parties. The leases generally provide us with a right of first refusal in the event of a proposed sale of the property by the landlord. Rental payments are expensed as incurred and have, to the extent applicable, been straight-lined over the term of the lease. The following is a summary of our contractual rental expense as presented in our Consolidated Statements of Operations and Comprehensive Income (Loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Contractual rent expense, including participation rent
|
$
|
4,050
|
|
|
$
|
2,932
|
|
|
$
|
8,926
|
|
|
$
|
6,192
|
|
|
|
|
|
|
Contractual rent expense, including participation rent and excluding amortization of above and below-market ground leases and straight-line rent
|
3,111
|
|
|
2,932
|
|
|
6,421
|
|
|
6,192
|
|
|
|
|
|